Lasik Vision Inc A)-$5903
B)-$56

question 8

Multiple Choice

Lasik Vision Inc.recently analyzed the project whose cash flows are shown below.However, before Lasik decided to accept or reject the project, the Federal Reserve changed interest rates and therefore the firm's WACC.The Fed's action did not affect the forecasted cash flows.By how much did the change in the WACC affect the project's forecasted NPV? Note that a project's expected NPV can be negative, in which case it should be rejected.
$$\begin{array} { | l | l | l | l | l | } \hline \text { Old WACC: } & 8.00 \% & & \text { New WACC: } & 8.50 \% \\\hline \text { Year } & 0 & 1 & 2 & 3 \\\hline \text { Cash flows } & - \$ 1,000 & \$ 410 & \$ 410 & \$ 410 \\\hline\end{array}$$

• A)-$59.03
• B)-$56.08
• C)-$53.27
• D)-$50.61
• E)-$48.08

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Definitions:

Reportable Segment

A component of a business that is subject to separate reporting because it engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses related to transactions with other components of the same company.

Revenue Test

A method to evaluate the viability or success of a business based on its ability to generate income.

Profit Test

An examination to determine the viability and profitability of a project, product, or business scenario.

Asset Test

A measure to determine a company's ability to quickly convert its assets into cash to cover short-term liabilities.