Question

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

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%"]      

Homework Answers

Answer #1

Indifferent WACC to accept to reject Project Z

Indifferent WACC = 13.5%

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