Question
You are reviewing the calculations for a capital asset proposal. The proposal comes from a department whose risk is higher than the risk for the
You are reviewing the calculations for a capital asset proposal. The proposal comes from a department whose risk is higher than the risk for the entire company. Using the companys WACC, the project has a small negative NPV. What should you do?
Select one:
a. Reject the proposal due to its negative net present value
b. Recalculate the NPV using a more appropriate discount rate
c. Accept the project if there are no other positive NPV projects
d. Reject the proposal because as the WACC reflects the firms cost of capital
e. Arbitrarily increase the discount rate by 2% and recalculate
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