Last month, Smith Systems Inc. decided to accept the project whose cash flows are shown below. However, before actually starting the project, the Bank of Canada took actions that lowered interest rates and therefore Smith's WACC. By how much did the change in the WACC affect the project's forecasted NPV? Assume that the Bank of Canada's action does not affect the cash flows, and note that a project's projected NPV can be negative, in which case it should be rejected.
A) $57.18
B) $60.19
C) $63.36
D) $66.69

Question

Last month, Smith Systems Inc. decided to accept the project whose cash flows are shown below. However, before actually starting the project, the Bank of Canada took actions that lowered interest rates and therefore Smith's WACC. By how much did the change in the WACC affect the project's forecasted NPV? Assume that the Bank of Canada's action does not affect the cash flows, and note that a project's projected NPV can be negative, in which case it should be rejected. 
A) $57.18 
B) $60.19 
C) $63.36 
D) $66.69

Quizplus · Accepted Answer

The Answer of Last month, Smith Systems Inc. decided to accept the project whose cash flows are shown below. However, before actually starting the project, the Bank of Canada took actions that lowered interest rates and therefore Smith's WACC. By how much did the change in the WACC affect the project's forecasted NPV? Assume that the Bank of Canada's action does not affect the cash flows, and note that a project's projected NPV can be negative, in which case it should be rejected. 
A) $57.18 
B) $60.19 
C) $63.36 
D) $66.69

Last Month, Smith Systems Inc