126k views
4 votes
A project requires an investment of $10 million and offers an annual after-tax cash flow of $1,250,000 indefinitely. If the firm's WACC is 12.5% and the project is riskier than the firm's average projects, should it be accepted?

1 Answer

2 votes

Answer:

No.It should not be Accepted.

Step-by-step explanation:

Weighted Average Cost of Capital (WACC) is the minimum return that is expected from a project. It shows the risk of the entity. If a project gives a return below the WACC, it is regarded as very risk and must not be accepted.

User Nieminen
by
8.3k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.