Question

Investment minus​$9 comma 272 comma 869 Net working capital change minus​$739 comma 000 ​$739 comma 000...

Investment minus​$9 comma 272 comma 869 Net working capital change minus​$739 comma 000 ​$739 comma 000 Operating cash flow ​$3 comma 232 comma 000 ​$3 comma 915 comma 000 ​$4 comma 528 comma 000 Salvage ​$539 comma 000 At what adjusted WACCs will the company accept this​ project?  Hint​: Find the IRR of the​ project, and use it as the maximum adjusted WACC for accepting the project.

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Answer #1

Maximum adjusted WACC for accepting the project = 12.67 %

Method of solving using excel sheet

Investment = 9,272,869 + Increase in Net working capital 739,000 = - 10011869 ........ ( enter this value in A1 - Excel sheet)

Operating cash flow

Year - 1 .......​3,232,000 ( enter this value in A2 )

Year - 2 .......3,915,000 ( enter this value in A3)

Year - 3 .......4,528,000 + salvage of 539000 + working capital recovery 739000 = 5806000 ( enter this value in A4)

now enter the syntax ............ = IRR(A1:A4) = 12.67 %

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