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**

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Year
Project Y
Project Z
0
–$1,500
–$1,500
1
$200
$900
2
$400
$600
3
$600
$300
4
$1,000
$200
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A firm with a WACC of 10% is considering the following mutually
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0
1
2
3
4
5
Project 1
-$350
$40
$40
$40
$215
$215
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-$650
$200
$200
$70
$70
$70
Which project would you recommend?
Select the correct answer.
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A firm with a WACC of 10% is considering the following mutually
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0
1
2
3
4
5
Project 1
-$250
$75
$75
$75
$170
$170
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-$700
$200
$200
$50
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$50
Which project would you recommend?
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eBook
A firm with a WACC of 10% is considering the following mutually
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0
1
2
3
4
5
Project 1
-$300
$65
$65
$65
$230
$230
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-$550
$200
$200
$135
$135
$135
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Select the correct answer.
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1
2
3
4
5
Project 1
-$300
$40
$40
$40
$165
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-$400
$200
$200
$60
$60
$60
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Select the correct answer.
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1
2
3
4
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Project 1
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$200
$200
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-$650
$250
$250
$45
$45
$45
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-$400
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$40
$40
$240
$240
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