A Project Will Generate $1 Million Net Cash Flow Annually

question 127

Multiple Choice

A project will generate $1 million net cash flow annually in perpetuity.If the project costs $7 million, what is the lowest WACC shown below that will make the NPV negative?

• A)10%
• B)12%
• C)14%
• D)16% $1 million/.16 = $7 million
• $6)25 million < $7 million
• Therefore, NPV < $0

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