Question

Projects Y and Z are mutually exclusive projects. Assume the company has a WACC of 14%.

Year	Project Y	Project Z
0	-$1,500	-$1,500
1	200	900
2	400	600
3	600	300
4	1,000	200

• What is the NPV of project Y?                             [ Select ] Possible Answer: ["22.04", "-19.71", "-10.33", "10.58"]      
• What is the NPV of project Z?                             [ Select ]                       Possible Answer: ["100.19", "-55.65", "-36.44", "72.06"]      
• At what WACC should the company be indifferent whether to accept or reject project Z? (hint: draw an NPV profile)                            [ Select ]                       Possible Answer: ["15.2%", "13.5%", "16.9%", "17.1%"]      

Answer 1

Indifferent WACC to accept to reject Project Z

Indifferent WACC = 13.5%

Formulae