Apply WACC in NPV. Brawn Blenders has the following incremental cash flow for its new project: Category T0 T1 T2 T3 Investment −$4,886,000 Net working capital change −$359,000 $359,000 Operating cash flow $1,731,000 $1,731,000 $1,731,000 Salvage $439,000 Should Brawn accept or reject this project at an adjusted WACC of 9.71%, 11.71%, or 13.71%? Should Brawn accept or reject this project at an adjusted WACC of 9.71%? (Select the best response.) A. The project should be accepted because the NPV is positive. The benefits exceed the costs in today's dollars. B. The project should be rejected because the NPV is negative. The costs exceed the benefits in today's dollars.
Apply WACC in NPV. Brawn Blenders has the following incremental cash flow for its new project: Category T0 T1 T2 T3 Investment −$4,886,000 Net working capital change −$359,000 $359,000 Operating cash flow $1,731,000 $1,731,000 $1,731,000 Salvage $439,000 Should Brawn accept or reject this project at an adjusted WACC of 9.71%, 11.71%, or 13.71%? Should Brawn accept or reject this project at an adjusted WACC of 9.71%? (Select the best response.) A. The project should be accepted because the NPV is positive. The benefits exceed the costs in today's dollars. B. The project should be rejected because the NPV is negative. The costs exceed the benefits in today's dollars.
Chapter11: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 2STP
Related questions
Question
Apply WACC in
NPV.
Brawn Blenders has the following incremental cash flow for its new project:|
Category
|
T0
|
T1
|
T2
|
T3
|
|
|
|
Investment
|
−$4,886,000
|
|
|
|
|
|
|
Net working capital change
|
−$359,000
|
|
|
|
$359,000
|
|
|
Operating cash flow
|
|
|
$1,731,000
|
$1,731,000
|
$1,731,000
|
|
|
Salvage
|
|
|
|
|
$439,000
|
|
Should Brawn accept or reject this project at an adjusted WACC of
9.71%,
11.71%,
or
13.71%?
Should Brawn accept or reject this project at an adjusted WACC of
9.71%?
(Select the best response.)The project should be accepted because the NPV is positive. The benefits exceed the costs in today's dollars.
The project should be rejected because the NPV is negative. The costs exceed the benefits in today's dollars.
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