Question 18 5 pts Last month Dow Chemical analyzed a project

Question 18 5 pts Last month, Dow Chemical analyzed a project with an initial cash outflow of $1 million, and expected cash inflows of $490,000 per year in years 1, 2, and 3. However,before the decision to accept or reject the project, the Federal Rese firm\'s WACC from 10% to 9.5%. By how much did this change in the WACC affect the project\'s forecasted NPV ve took monetary action that lowered interest rates and changed the Your answer should be a positive number between 8132 and 12047, rounded to even dollars (although decimal places are okay), with no special characters D | Question 19 5 pts Ingram Electric is considering a project with an initial cash outflow of $800,000. This project is expected to have cash inflows of $350,000 per year in years 1, 2, and 3. The company has a WACC of 6.45% which is used as its FS F6 F7 58

Solution

(18) Project NPV when WACC = 10 %

Initial Investment = $ 1000000

Cash Inflows = $ 490000 for three years

PV of Cash Inflows = 490000 x (1/0.1) x [1-{1/(1.1)^(3)}] = $ 1218557.476

Project NPV = NPV1 = 1218557.476 - 1000000 = $ 218557.476

Project NPV when WACC = 9.5 %

Initial Investment = $ 1000000

Cash Inflows = $ 490000 for three years

PV of Cash Inflows = 490000 x (1/0.095) x [1-{1/(1.095)^(3)}] = $ 1229364.3456

Project NPV = NPV2 = 1218557.476 - 1000000 = $ 229364.3456

Change in NPV = NPV2 - NPV1 = 229364.3456 - 218557.476 = $ 10806.87 approximately.