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By how much did the change in wacc affect projects npv
Course:- Financial Econometrics
Reference No.:- EM13335504




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The Seattle Corporation has been presented with an investment opportunity which will yield end-of-year cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. What is the NPV for this investment? Now assume the Federal Reserve takes actions which increases interest rates and therefore impacts the firm's WACC. If the new WACC for Seattle Corporation becomes 14 percent By how much did the change in the WACC affect the project's forecasted NPV? That is, find the ?NPV resulting from the Federal Reserve actions.




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