Your Moma
What would be your decision if you realize that the cost of capital might be under-estimated and the possible cost of capital is around 18%?
Plot the NPV profile to illustrate the relationships between NPV of the projects and cost of capital? Which project’s NPV is more sensitive to the change in the cost of capital?
Find the crossover rate.
You are a financial analyst for the Feeling Great Company. The director of capital budgeting has asked you to analyze two capital investments, Projects A and B. Each project has a cost of $2,000,000 and the cost of capital is 15%. The projects’ expected net cash flows are as follows:
What would be your decision if you realize that the cost of capital might be under-estimated and the possible cost of capital is around 18%?
Plot the NPV profile to illustrate the relationships between NPV of the projects and cost of capital? Which project’s NPV is more sensitive to the change in the cost of capital?
Find the crossover rate.
You are a financial analyst for the Feeling Great Company. The director of capital budgeting has asked you to analyze two capital investments, Projects A and B. Each project has a cost of $2,000,000 and the cost of capital is 15%. The projects’ expected net cash flows are as follows:
What would be your decision if you realize that the cost of capital might be under-estimated and the possible cost of capital is around 18%?
Plot the NPV profile to illustrate the relationships between NPV of the projects and cost of capital? Which project’s NPV is more sensitive to the change in the cost of capital?