Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

Question 18 5 pts Last month, Dow Chemical analyzed a project with an initial cash outflow of $1 million, and expected cash inflows of $465.000

image text in transcribed
Question 18 5 pts Last month, Dow Chemical analyzed a project with an initial cash outflow of $1 million, and expected cash inflows of $465.000 per year in years 1. 2. and 3. However, before the decision to accept or reject the project, the Federal Reserve took monetary action that lowered interest rates and changed the firm's WACC from 10% to 9.5%. By how much did this change in the WACC affect the project's forecasted NPV? Your answer should be a positive number between 8132 and 12047, rounded to even dollars (although decimal places are okay), with no special characters. 5 pts Question 20 Arrow Electronics is considering Projects S and L. which are mutually exclusive, equally risky, and not repeatable. Project has an initial cost of $1 million and cash inflows of $370,000 for 4 years, while Project L has an initial cost of $2 million and cash inflows of $720,000 for 4 years. The CEO wants to use the IRR criterion, while the CFO favors the NPV method, using a WACC of 8.32% You were hired to advise the firm on the best procedure. If the wrong decision criterion is used, how much potential value would the form lose? That is what is the difference between the NPVs for these two projects? Your answer should be between 112000 and 202000, rounded to even dollars (although decimal places are okay), with no special characters

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started