1. Project K has an initial cost of $81,996, and its expected net cash inflows are $12,250 per year for 10 years. The firm has a WACC of 7 percent, and Project K’s risk would be similar to that of the firm’s existing assets. Calculate the discounted payback period of Project K. Selected Answer: Incorrecta. 10.00 years
a. 10.00 years Correctb. 9.35 years c. 9.45 years d. 9.75 years e. 9.00 years
2. Last month, Lloyd's Systems analyzed the 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 action did not affect the forecasted cash flows. By how much did the change in the WACC affect the project's forecasted NPV? Note that a project's projected NPV can be negative, in which case it should be rejected. Old WACC: 10.00% New WACC: 9.50% Year 0 1 2 3 Cash flows -$1,000 $410 $410 $410
a. 0$11.12 b. 0$10.13 c. 0$10.22 d. 0$9.04 e. 0$10.85