The Fed's action did not affectthe forecasted cash flows.Вy howmuch did the change in the interestrate affect the project'sforecasted NPV?Should the projectbe accepted after the rate change?Old interest rate:10.00%Newinterest rate:12%Year12.3Cash flows-$1,250$400$500$600 ABC Co. is considering a projectthat has the following cash flowWhat is the project'sdata.payback?Year12345Cash flows-$1,150$300$310$320$330$240XYZ Co. is considering a projectthat has the following cash flowand interest rate.What's theproject's discounted payback?Interest rate:10.00%Year1 23Cash flows-$850$360$480$6003A firm is considering Projects Sand L, whose cash flows are shownbelow.Which project has a higherNPV, by how much?Interest rate:10.00%Year123 4-$1,100$380$380CFs$380$380-$2,000$765$765CF,$765$765FMA Co. analyzed the project whosecash flows are shown below.4However, before the decision toaccept or reject the project, theFederal Reserve took actions thatchanged interest rates andtherefore the firm's interest rate.The Fed's action did not affectthe forecasted cash flows.By howmuch did the change in the interestrate affect the project'sfo:NDV2Shouldthenro:

Net present value (NPV) of an alternative/project refers to the variance between the initial…

The Fed's action did not affect the forecasted cash flows. Вy how much did the change in the interest rate affect the project's forecasted NPV? Should the project be accepted after the rate change? Old interest rate: 10.00% New interest rate: 12% 1 2 -$1,250 Year 3 Cash flows $400 $500 $600

The Fed's action did not affect the forecasted cash flows. Вy how much did the change in the interest rate affect the project's forecasted NPV? Should the project be accepted after the rate change? Old interest rate: 10.00% New interest rate: 12% 1 2 -$1,250 Year 3 Cash flows $400 $500 $600

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter11: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 2STP

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Question

The Fed's action did not affect
the forecasted cash flows.
Вy how
much did the change in the interest
rate affect the project's
forecasted NPV?
Should the project
be accepted after the rate change?
Old interest rate:
10.00%
New
interest rate:
12%
Year
1
2.
3
Cash flows
-$1,250
$400
$500
$600

ABC Co. is considering a project
that has the following cash flow
What is the project's
data.
payback?
Year
1
2
3
4
5
Cash flows
-$1,150
$300
$310
$320
$330
$240
XYZ Co. is considering a project
that has the following cash flow
and interest rate.
What's the
project's discounted payback?
Interest rate:
10.00%
Year
1 2
3
Cash flows
-$850
$360
$480
$600
3
A firm is considering Projects S
and L, whose cash flows are shown
below.
Which project has a higher
NPV, by how much?
Interest rate:
10.00%
Year
1
2
3 4
-$1,100
$380
$380
CFs
$380
$380
-$2,000
$765
$765
CF,
$765
$765
FMA Co. analyzed the project whose
cash flows are shown below.
4
However, before the decision to
accept or reject the project, the
Federal Reserve took actions that
changed interest rates and
therefore the firm's interest rate.
The Fed's action did not affect
the forecasted cash flows.
By how
much did the change in the interest
rate affect the project's
fo:
NDV2
Should
the
nro:

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