Corner Jewelers, Inc

question 54

Multiple Choice

Corner Jewelers, Inc.recently analyzed the project whose cash flows are shown below.However, before the company 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.

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

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Definitions:

Limited Liability Corporation

A corporate framework that merges the direct taxation benefit of sole proprietorships or partnerships with the corporation's advantage of limited liability.

Partnership

A legal and business relationship between two or more people who collaborate and share the responsibilities, profits, and losses of running an enterprise.

Resource Plan

A detailed outline identifying the resources (such as manpower, tools, finances) required to complete a project or achieve a business objective.

Business Plan

A formal written document that outlines the goals, strategies, financial expectations, and market analysis for a business over a specific time period.