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Should the firm take on the warehouse renovation? The project has a negative NPV using the firm's WACC. This means that the financial markets offer superior projects in the same risk class (namely, the firm itself). The answer is clear: the project should be rejected. For future reference, our discussion of the WACC is summarized in Table 15.1.

Ross et al.: Fundamentals of Corporate Finance, Sixth Edition, Alternate Edition

VI. Cost of Capital and Long-Term Financial Policy

15. Cost of Capital

© The McGraw-Hill Companies, 2002

PART SIX Cost of Capital and Long-Term Financial Policy

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