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Last month, Magnum Inc. analyzed a project whose cash flows are shown below. However, before the decision to accept or reject the project, the Federal
Last month, Magnum Inc. analyzed a project whose cash flows are shown below. However, before the decision to accept or reject the project, the Federal Reserve took actions that changed interest rates (and, therefore, the firm's WACC). The Fed's actions did not affect the forecasted cash flows. By how much did the change in the WACC affect the project's forecasted NPV? (Ch. 11)
Old WACC | 10% | |||
New WACC | 7% | |||
Year | 0 | 1 | 2 | 3 |
Cash Flow | -1,000 | 420 | 420 | 420 |
Group of answer choices
$72.17
$57.73
$80.83
$46.19
$0 (no change in NPV)
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