标题: Just remembered - Under the IRR method [打印本页] 作者: burning0spear 时间: 2011-7-11 20:09 标题: Just remembered - Under the IRR method
If WACC decreases from 14 to 12, what happens to the NPV...
Decreases, Increases, Remains the same
I thought, it decreases....any ideas? Thanks.作者: LokiDog2 时间: 2011-7-11 20:09
If WACC decrease, NPV will increase. WACC isn't really needed in the calculation of IRR.作者: cyber21 时间: 2011-7-11 20:09
Yes if WACC goes down you have to think that you are discounting it less in any given period so the NPV would be greater.作者: Siddimaula 时间: 2011-7-11 20:09
hey guys. would "increase" be the same as "positive?"作者: draz 时间: 2011-7-11 20:09
all else equal yes, IRR is when NPV=0, so if the discount goes down, NPV would now be positive instead of zero.作者: shootingstar 时间: 2011-7-11 20:09
sweet~ that .0000000000001% of sanity goes a long way late at night.作者: kasinkei 时间: 2011-7-11 20:09
WACC has nothing to do with IRR. No impact.
Think from the perspective that IRR is more dependent on cash flows. No matter what is happening in economy/inflation/borrowing/taxes作者: Mechanic 时间: 2011-7-11 20:09
The guy above is wrong. In any case where IRR < WACC, NPV is NEGATIVE.
The question had WACC go from 14 - 12, when IRR was 11. The NPV for the project is still negative. It became less negative, but the question asked what is the project's NPV, negative, positive, zero? It is still negative.
Edited 1 time(s). Last edit at Friday, June 12, 2009 at 10:20AM by billbelemy22.作者: homie 时间: 2011-7-11 20:09
""The guy above is wrong. In any case where IRR < WACC, NPV is NEGATIVE. ""
Dear Bill, IRR has nothing to do with WACC, in its calculation.
It is only after you have calculated IRR that you compare it to WACC and if it is less than WACC which means your NPV is negative. Simple artihmatics.
Ok , let me tell you from another perspective.
Take your calculator and feed Cf0=-100 and Cf1=110
Now press IRR and see what happens ? It will not be dependent on your input of I/Y button on calculator.作者: Londonrocks 时间: 2011-7-11 20:09
I never said IRR had anything to do with WACC.
but NPV has everything to do with IRR and its relationship to WACC. When IRR < WACC, NPV = negative.
Still negative was the answer to the question.作者: Penny-wenny 时间: 2011-7-11 20:09
Agree with Bill. That was the question..the WACC decreased to 12 however the IRR was still below and thus the NPV was negative.作者: dcfox83 时间: 2011-7-11 20:09
Are we discussing about the question from the test? Here we go:
If IRR < WACC => NPV must be negative because NPV = 0 if WACC = IRR.作者: dontknow1987 时间: 2011-7-11 20:09
Guys do we have to complicate it so much, if we are talking about NPV, to me is pretty clear: wacc decreases ----> NPV increases; the same logic as bond and yields, you discount by a lesser amount ; that's it, full stop. I don;t know why IRR should enter the picture here....correct me if I am wrong...作者: amqata 时间: 2011-7-11 20:09
dont know how the question was worded.. sure remember that it was quite a trap..
