1. Why is WACC a reasonable discount rate to use when estimating the NPV of a project using free cash flows to the firm?
Given following information, what is the companys ROE?
Debt 5: 60%
Tax Rate: 35%
Earnings before interest and tax: $20,000
Interest Rate: 8%
Assets: $160,000
A. 12.098%
B. 12.153%
C. 13.116%
D. 13.867%
2. Provide 2 comments on the following statement: the reason we are seeing fewer market creating innovations is because using NPV and IRR to make capital budgeting decisions will result in only accepting projects with short payoff periods.