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Base Case:

Key Input Data


Equipment cost
NWC- start-up costs
Annual growth in WC
Sales price per unit
Variable cost per unit
First year sales (in units)
Annual growth in Unit Sales
Fixed costs
Salvage Value
Tax rate

Flotation costs
Debt-equity ratio
Flotation cost of equity
Flotation cost of debt

$5,000,000
$1,000,000
1.00%
$16
$11
500,000
4.00%
$700,000
$250,000
40%

Value
Equity-Value ratio
Debt-Value ratio

Value
Equity-Value ratio
Debt-Value ratio
WACC

Accum'd Depreciation
Book Value

6.25%
$6,400,000

Net Salvage Value


0.6
13.50%
7.50%

Equipment
$250,000
669,500
$417,800

Salvage Value
Book Value
SVNOT

1.6
0.6
0.4
11.25%

Depreciation and Amortization Schedule


Equipment Depreciation Rate
Equipment Depreciation , Dollars

1.6
0.6
0.4

flotation costs %
Amount raised

WACC
Debt-equity ratio
Cost of equity
After-tax cost of debt

0.600
8.50%
2.50%

Years
1
14.29%
$714,500

2
24.49%
$1,224,500

3
17.49%
$874,500

4
12.49%
$624,500

5
8.93%
$446,500

$714,500
$4,285,500

$1,224,500
$3,061,000

$874,500
$2,186,500

$624,500
$1,562,000

$446,500
$1,115,500

Ending Bk Val: Cost - Accum'd Deprn


Projected Net Cash Flows (Time line of annual cash flows)

Cash Flow
2008

2009

2010

2011

2012

1,000,000

500,000
$16.00
$1,010,000

520,000
$16.00
$1,020,100

540,800
$16.00
$1,030,301

562,432
$16.00
$1,040,604

Sales revenue
Variable costs
Fixed operating costs
Depreciation (equipment)
Oper. income before taxes (EBIT)
Taxes on operating income (40%)
Net Operating Profit After Taxes

$8,000,000
5,500,000
700,000
714,500
1,085,500
434,200
$651,300

$8,320,000
5,720,000
700,000
1,224,500
675,500
270,200
$405,300

$8,652,800
5,948,800
700,000
874,500
1,129,500
451,800
$677,700

$8,998,912
6,186,752
700,000
624,500
1,487,660
595,064
$892,596

Add back depreciation


Operating cash flow

714,500
$1,365,800

1,224,500
$1,629,800

874,500
$1,552,200

624,500
$1,517,096

Increase in Net Operating WC


Net capital spending

$10,000.00
$0

$10,100.00
$0

$10,201.00
$0

$10,303.01
$0

$1,355,800

$1,619,700

$1,541,999

$1,506,793

Units sold
Sales price
Net working capital

Cash Flows From Project

Appraisal of the Proposed Project


Equipment + Net working capital + Flotation cost
Cash Flows From Project
Recovered net operating working capital
Net salvage value
Net Cash Flow (Time line of cash flows for NPV)

2008
($6,400,000)

($6,400,000)

Cash Flows
2011

2009

2010

2012

$1,355,800

$1,619,700

$1,541,999

$1,506,793

$1,355,800

$1,619,700

$1,541,999

$1,506,793

Net Present Value (NPV)


IRR
MIRR
PI

The project SHOULD be accepted. The NPV is positive, the Pro


exceeds 1 and both the IRR and the MIRR are greater then the
return of 11.25%.

$690,437.10
14.57%
13.17%
1.11

NPV Profilefor Harris Inc.

NPV Profile Data


WACC

NPV Profile

0%

$5,000,000.00

1.00%
2.00%
3.00%

$4,000,000.00

4.00%

NPV

5.00%

$3,000,000.00

6.00%
7.00%
8.00%

IRR = 14.93%

$2,000,000.00

9.00%
10.00%

$1,000,000.00

11.00%
12.00%

$0.00
0%
($1,000,000.00)

($2,000,000.00)

13.00%

5%

10%

15%

WACC

20%

25%

14.00%
15.00%
16.00%
17.00%
18.00%
19.00%
20.00%

The NPV Profile of Harris Inc.'s potiential new project states that the project should be accepted at a weighted
average cost of capital rate below 14.93%. A rate below that point will result in a profitable NPV and rate above
that point will result in a loss of money per the NPV for the project.

The NPV Profile of Harris Inc.'s potiential new project states that the project should be accepted at a weighted
average cost of capital rate below 14.93%. A rate below that point will result in a profitable NPV and rate above
that point will result in a loss of money per the NPV for the project.

6
8.92%
$446,000
$446,000
$669,500

7+8
13.39%
$669,500

$669,500

Cash Flows
2013

2014

584,929
$16.00
$1,051,010

608,326
$16.00
$1,061,520

$9,358,868
6,434,222
700,000
446,500
1,778,146
711,259
$1,066,888

$9,733,223
6,691,591
700,000
446,000
1,895,632
758,253
$1,137,379

446,500
$1,513,388

446,000
$1,583,379

$10,406.04
$0

$10,510.10
$0

$1,502,982

$1,572,869

2013

2014

$1,502,982

$1,572,869
$1,000,000
$417,800

$1,502,982

$2,990,669

ositive, the Profibility Index


greater then the required rate of

PV Profile Data
NPV
$4,117,943.04
$3,722,190.56
$3,348,050.30
$2,994,070.57
$2,658,912.84
$2,341,341.79
$2,040,216.36
$1,754,481.63
$1,483,161.49
$1,225,352.00
$980,215.33
$746,974.34
$524,907.61
$313,344.87
$111,662.95
($80,717.99)
($264,337.87)
($439,699.81)
($607,272.96)
($767,495.13)
($920,775.14)

Annual growth
NPV
IRR
MIRR
PI

Base Case

Best Case

Worst case

4%
$757,104
14.93%
13.36%
1.12

6%
$1,069,591
16.32%
14.18%
1.17

2%
$459,623
13.53%
12.56%
1.07

Squared Deviation Times

Scenario

Probability

Base Case
Best Case
Worst Case

50%
25%
25%

NPV
$757,104
$1,069,591
$459,623

Probability
7,037,963.29
23,829,432,748.98
22,685,197,239.57
46,521,667,951.83

Expected NPV
Standard Deviation of NPV

$760,855.55
$215,689

Squared Deviation Times

Scenario

Probability

IRR

Probability

Base Case
Best Case
Worst Case

50%
25%
25%

14.93%
16.32%
13.53%

0.0000000001
0.0000487569
0.0000485682
0.0000973252

Expected IRR
Standard Deviation of IRR

14.926706564706300%
0.99%

Squared Deviation Times

Scenario

Probability

MIRR

Probability

Base Case
Best Case
Worst Case

50%
25%
25%

13.36%
14.18%
12.56%

0.0000000004
0.0000166088
0.0000163879
0.0000329970

Expected MIRR
Standard Deviation of MIRR

13.366275427562300%
0.57%

Squared Deviation Times

Scenario

Probability

PI

Probability

Base Case
Best Case
Worst Case

50%
25%
25%

1.12
1.17
1.07

0.0000001755
0.0005940856
0.0005655589
0.0011598200

Expected IRR
Standard Deviation of IRR

1.12
0.03

Part C: The best and worst case for the NPV still yields the same result as the base
case of accepting the project. Each of the situations produces positive results. The
case of the IRR and MIRR is the same because they are all over 11.25%. All senerios
would be accepted in the PI test as well.

The expected NPV in growth is still a positive number so should be accepted. Broken
down even the worst case scenario would be accepted showing the stength of the
project.

The IRR in growth exceeds the WACC in all scenarios this would result in the
acceptance of the project.

Similar to the IRR the MIRR in growth exceeds the WACC in all scenarios this would
result in the acceptance of the project.

The expected profibility index in growth exceeds 1 so the project should be accepted.
Even upon a low end deviation the worst case scenario holds above 1.

result as the base


ositive results. The
11.25%. All senerios

be accepted. Broken
the stength of the

result in the

enarios this would

should be accepted.
ove 1.

Base Case:
Key Input Data
Equipment cost
NWC- start-up costs
Annual growth in WC
Sales price per unit
Variable cost per unit
First year sales (in units)
Annual growth in Unit Sales
Fixed costs
Salvage Value
Tax rate

Flotation costs
Debt-equity ratio
Flotation cost of equity
Flotation cost of debt

$5,000,000
$1,000,000
1.00%
$16
$11
449,830
4.00%
$700,000
$250,000
40%

Value
Equity-Value ratio
Debt-Value ratio

Value
Equity-Value ratio
Debt-Value ratio
WACC

Accum'd Depreciation
Book Value

6.25%
$6,400,000

Net Salvage Value


0.6
13.50%
7.50%

Equipment
$250,000
669,500
$417,800

Salvage Value
Book Value
SVNOT

1.6
0.6
0.4
11.25%

Depreciation and Amortization Schedule


Equipment Depreciation Rate
Equipment Depreciation , Dollars

1.6
0.6
0.4

flotation costs %
Amount raised

WACC
Debt-equity ratio
Cost of equity
After-tax cost of debt

0.6
8.50%
2.50%

Years
1
14.29%
$714,500

2
24.49%
$1,224,500

3
17.49%
$874,500

4
12.49%
$624,500

5
8.93%
$446,500

$714,500
$4,285,500

$1,224,500
$3,061,000

$874,500
$2,186,500

$624,500
$1,562,000

$446,500
$1,115,500

Ending Bk Val: Cost - Accum'd Deprn


Projected Net Cash Flows (Time line of annual cash flows)

Cash Flow
2008

2009

2010

2011

2012

1,000,000

449,830
$16.00
$1,010,000

467,823
$16.00
$1,020,100

486,536
$16.00
$1,030,301

505,997
$16.00
$1,040,604

Sales revenue
Variable costs
Fixed operating costs
Depreciation (equipment)
Oper. income before taxes (EBIT)
Taxes on operating income (40%)
Net Operating Profit After Taxes

$7,197,276
4,948,127
700,000
714,500
834,649
333,860
$500,789

$7,485,167
5,146,052
700,000
1,224,500
414,615
165,846
$248,769

$7,784,574
5,351,895
700,000
874,500
858,179
343,272
$514,908

$8,095,957
5,565,970
700,000
624,500
1,205,487
482,195
$723,292

Add back depreciation


Operating cash flow

714,500
$1,215,289

1,224,500
$1,473,269

874,500
$1,389,408

624,500
$1,347,792

Increase in Net Operating WC


Net capital spending

$10,000.00
$0

$10,100.00
$0

$10,201.00
$0

$10,303.01
$0

$1,205,289

$1,463,169

$1,379,207

$1,337,489

Units sold
Sales price
Net working capital

Cash Flows From Project

Appraisal of the Proposed Project


Equipment + Net working capital + Flotation cost
Cash Flows From Project
Recovered net operating working capital
Net salvage value
Net Cash Flow (Time line of cash flows for NPV)

2008
($6,400,000)

($6,400,000)

Cash Flows
2011

2009

2010

2012

$1,205,289

$1,463,169

$1,379,207

$1,337,489

$1,205,289

$1,463,169

$1,379,207

$1,337,489

Net Present Value (NPV)


IRR
MIRR
PI

$0.00
11.25%
11.25%
1.00

6
8.92%
$446,000
$446,000
$669,500

7+8
13.39%
$669,500

$669,500

Cash Flows
2013

2014

526,237
$16.00
$1,051,010

547,287
$16.00
$1,061,520

$8,419,795
5,788,609
700,000
446,500
1,484,686
593,874
$890,812

$8,756,587
6,020,154
700,000
446,000
1,590,433
636,173
$954,260

446,500
$1,337,312

446,000
$1,400,260

$10,406.04
$0

$10,510.10
$0

$1,326,906

$1,389,750

2013

2014

$1,326,906

$1,389,750
$1,000,000
$417,800

$1,326,906

$2,807,550

Base Case:
Key Input Data
Equipment cost
NWC- start-up costs
Annual growth in WC
Sales price per unit
Variable cost per unit
First year sales (in units)
Annual growth in Unit Sales
Fixed costs
Salvage Value
Tax rate

Flotation costs
Debt-equity ratio
Flotation cost of equity
Flotation cost of debt

$5,000,000
$1,000,000
1.00%
$15.50
$11
500,000
4.00%
$700,000
$250,000
40%

Value
Equity-Value ratio
Debt-Value ratio

Value
Equity-Value ratio
Debt-Value ratio
WACC

Accum'd Depreciation
Book Value

6.25%
$6,400,000

Net Salvage Value


0.6
13.50%
7.50%

Equipment
$250,000
669,500
$417,800

Salvage Value
Book Value
SVNOT

1.6
0.6
0.4
11.25%

Depreciation and Amortization Schedule


Equipment Depreciation Rate
Equipment Depreciation , Dollars

1.6
0.6
0.4

flotation costs %
Amount raised

WACC
Debt-equity ratio
Cost of equity
After-tax cost of debt

0.6
8.50%
2.50%

Years
1
14.29%
$714,500

2
24.49%
$1,224,500

3
17.49%
$874,500

4
12.49%
$624,500

5
8.93%
$446,500

$714,500
$4,285,500

$1,224,500
$3,061,000

$874,500
$2,186,500

$624,500
$1,562,000

$446,500
$1,115,500

Ending Bk Val: Cost - Accum'd Deprn


Projected Net Cash Flows (Time line of annual cash flows)

Cash Flow
2008

2009

2010

2011

2012

1,000,000

500,000
$15.50
$1,010,000

520,000
$15.50
$1,020,100

540,800
$15.50
$1,030,301

562,432
$15.50
$1,040,604

Sales revenue
Variable costs
Fixed operating costs
Depreciation (equipment)
Oper. income before taxes (EBIT)
Taxes on operating income (40%)
Net Operating Profit After Taxes

$7,749,149
5,500,000
700,000
714,500
834,649
333,860
$500,789

$8,059,115
5,720,000
700,000
1,224,500
414,615
165,846
$248,769

$8,381,479
5,948,800
700,000
874,500
858,179
343,272
$514,908

$8,716,739
6,186,752
700,000
624,500
1,205,487
482,195
$723,292

Add back depreciation


Operating cash flow

714,500
$1,215,289

1,224,500
$1,473,269

874,500
$1,389,408

624,500
$1,347,792

Increase in Net Operating WC


Net capital spending

$10,000.00
$0

$10,100.00
$0

$10,201.00
$0

$10,303.01
$0

$1,205,289

$1,463,169

$1,379,207

$1,337,489

Units sold
Sales price
Net working capital

Cash Flows From Project

Appraisal of the Proposed Project


Equipment + Net working capital + Flotation cost
Cash Flows From Project
Recovered net operating working capital
Net salvage value
Net Cash Flow (Time line of cash flows for NPV)

2008
($6,400,000)

($6,400,000)

Cash Flows
2011

2009

2010

2012

$1,205,289

$1,463,169

$1,379,207

$1,337,489

$1,205,289

$1,463,169

$1,379,207

$1,337,489

Net Present Value (NPV)


IRR
MIRR
PI

$0.00
11.25%
11.25%
1.00

6
8.92%
$446,000
$446,000
$669,500

7+8
13.39%
$669,500

$669,500

Cash Flows
2013

2014

584,929
$15.50
$1,051,010

608,326
$15.50
$1,061,520

$9,065,408
6,434,222
700,000
446,500
1,484,686
593,874
$890,812

$9,428,024
6,691,591
700,000
446,000
1,590,433
636,173
$954,260

446,500
$1,337,312

446,000
$1,400,260

$10,406.04
$0

$10,510.10
$0

$1,326,906

$1,389,750

2013

2014

$1,326,906

$1,389,750
$1,000,000
$417,800

$1,326,906

$2,807,550

Base Case:
Key Input Data
Equipment cost
NWC- start-up costs
Annual growth in WC
Sales price per unit
Variable cost per unit
First year sales (in units)
Annual growth in Unit Sales
Fixed costs
Salvage Value
Tax rate

Flotation costs
Debt-equity ratio
Flotation cost of equity
Flotation cost of debt

$5,000,000
$1,000,000
1.00%
$16
$11
500,000
4.00%
$700,000
$250,000
40%

Value
Equity-Value ratio
Debt-Value ratio

Value
Equity-Value ratio
Debt-Value ratio
WACC

Accum'd Depreciation
Book Value

7.79%
$6,506,961

Net Salvage Value


0.6
13.50%
7.50%

Equipment
$250,000
669,500
$417,800

Salvage Value
Book Value
SVNOT

1.3
0.8
0.5
14.02%

Depreciation and Amortization Schedule


Equipment Depreciation Rate
Equipment Depreciation , Dollars

1.3
0.8
0.5

flotation costs %
Amount raised

WACC
Debt-equity ratio
Cost of equity
After-tax cost of debt

0.284
8.50%
2.50%

Years
1
14.29%
$714,500

2
24.49%
$1,224,500

3
17.49%
$874,500

4
12.49%
$624,500

5
8.93%
$446,500

$714,500
$4,285,500

$1,224,500
$3,061,000

$874,500
$2,186,500

$624,500
$1,562,000

$446,500
$1,115,500

Ending Bk Val: Cost - Accum'd Deprn


Projected Net Cash Flows (Time line of annual cash flows)

Cash Flow
2008

2009

2010

2011

2012

1,000,000

500,000
$16.00
$1,010,000

520,000
$16.00
$1,020,100

540,800
$16.00
$1,030,301

562,432
$16.00
$1,040,604

Sales revenue
Variable costs
Fixed operating costs
Depreciation (equipment)
Oper. income before taxes (EBIT)
Taxes on operating income (40%)
Net Operating Profit After Taxes

$8,000,000
5,500,000
700,000
714,500
1,085,500
434,200
$651,300

$8,320,000
5,720,000
700,000
1,224,500
675,500
270,200
$405,300

$8,652,800
5,948,800
700,000
874,500
1,129,500
451,800
$677,700

$8,998,912
6,186,752
700,000
624,500
1,487,660
595,064
$892,596

Add back depreciation


Operating cash flow

714,500
$1,365,800

1,224,500
$1,629,800

874,500
$1,552,200

624,500
$1,517,096

Increase in Net Operating WC


Net capital spending

$10,000.00
$0

$10,100.00
$0

$10,201.00
$0

$10,303.01
$0

$1,355,800

$1,619,700

$1,541,999

$1,506,793

Units sold
Sales price
Net working capital

Cash Flows From Project

Appraisal of the Proposed Project


Equipment + Net working capital + Flotation cost
Cash Flows From Project
Recovered net operating working capital
Net salvage value
Net Cash Flow (Time line of cash flows for NPV)

2008
($6,506,961)

($6,506,961)

Cash Flows
2011

2009

2010

2012

$1,355,800

$1,619,700

$1,541,999

$1,506,793

$1,355,800

$1,619,700

$1,541,999

$1,506,793

Net Present Value (NPV)


IRR
MIRR
PI

$0.00
14.02%
14.02%
1.00

6
8.92%
$446,000
$446,000
$669,500

7+8
13.39%
$669,500

$669,500

Cash Flows
2013

2014

584,929
$16.00
$1,051,010

608,326
$16.00
$1,061,520

$9,358,868
6,434,222
700,000
446,500
1,778,146
711,259
$1,066,888

$9,733,223
6,691,591
700,000
446,000
1,895,632
758,253
$1,137,379

446,500
$1,513,388

446,000
$1,583,379

$10,406.04
$0

$10,510.10
$0

$1,502,982

$1,572,869

2013

2014

$1,502,982

$1,572,869
$1,000,000
$417,800

$1,502,982

$2,990,669

The analysis of the different breakevens is important because it shows specific points in which
project would start loosing money. If first year sales dip below 449,830 the project begins to lo
money and sould be scrapped. If the product is not selling and price is reduced to below $15.5
project will be loosing oney so again the porject should be scrapped. If the company restructu
and changes its debt to quity ration to .284 the NPV will then result in z oif all else is held cons
with the project.

hows specific points in which the


,830 the project begins to loose
ce is reduced to below $15.50 the
ed. If the company restructures
lt in z oif all else is held constant

Company A
Company B
Company C
Company D
Company E
New Project
Tax Rate
RFR
MRP
PSDR

Equity Beta
2.25
2.00
1.60
1.30
2.50
2.29

Debt
0.25
0.4
0.5
0.15
0.45
0.5

Equity
0.75
0.6
0.5
0.85
0.55
0.5

Value Asset Beta


0.9
1.88
0.84
1.43
0.8
1.00
0.94
1.18
0.82
1.68
0.8
1.43

40%
2.5%
6.24%
16.79%

The Project Specific Discount Rate and the WACC have a


differance of roughly 5.54%. This is a large difference and
shows how much the WACC can be effected by a specific
project.

Base Case:
Key Input Data
Equipment cost
NWC- start-up costs
Annual growth in WC
Sales price per unit
Variable cost per unit
First year sales (in units)
Annual growth in Unit Sales
Fixed costs
Salvage Value
Tax rate

Flotation costs
Debt-equity ratio
Flotation cost of equity
Flotation cost of debt

$5,000,000
$1,000,000
1.00%
$16
$11
500,000
4.00%
$700,000
$250,000
40%

Value
Equity-Value ratio
Debt-Value ratio

Value
Equity-Value ratio
Debt-Value ratio
WACC

Accum'd Depreciation
Book Value

6.25%
$6,400,000

Net Salvage Value


0.6
13.50%
7.50%

Equipment
$250,000
669,500
$417,800

Salvage Value
Book Value
SVNOT

1.6
0.6
0.4
16.79%

Depreciation and Amortization Schedule


Equipment Depreciation Rate
Equipment Depreciation , Dollars

1.6
0.6
0.4

flotation costs %
Amount raised

WACC
Debt-equity ratio
Cost of equity
After-tax cost of debt

0.600
8.50%
2.50%

Years
1
14.29%
$714,500

2
24.49%
$1,224,500

3
17.49%
$874,500

4
12.49%
$624,500

5
8.93%
$446,500

$714,500
$4,285,500

$1,224,500
$3,061,000

$874,500
$2,186,500

$624,500
$1,562,000

$446,500
$1,115,500

Ending Bk Val: Cost - Accum'd Deprn


Projected Net Cash Flows (Time line of annual cash flows)

Cash Flow
2008

2009

2010

2011

2012

1,000,000

500,000
$16.00
$1,010,000

520,000
$16.00
$1,020,100

540,800
$16.00
$1,030,301

562,432
$16.00
$1,040,604

Sales revenue
Variable costs
Fixed operating costs
Depreciation (equipment)
Oper. income before taxes (EBIT)
Taxes on operating income (40%)
Net Operating Profit After Taxes

$8,000,000
5,500,000
700,000
714,500
1,085,500
434,200
$651,300

$8,320,000
5,720,000
700,000
1,224,500
675,500
270,200
$405,300

$8,652,800
5,948,800
700,000
874,500
1,129,500
451,800
$677,700

$8,998,912
6,186,752
700,000
624,500
1,487,660
595,064
$892,596

Add back depreciation


Operating cash flow

714,500
$1,365,800

1,224,500
$1,629,800

874,500
$1,552,200

624,500
$1,517,096

Increase in Net Operating WC


Net capital spending

$10,000.00
$0

$10,100.00
$0

$10,201.00
$0

$10,303.01
$0

$1,355,800

$1,619,700

$1,541,999

$1,506,793

Units sold
Sales price
Net working capital

Cash Flows From Project

Appraisal of the Proposed Project


Equipment + Net working capital + Flotation cost
Cash Flows From Project
Recovered net operating working capital
Net salvage value
Net Cash Flow (Time line of cash flows for NPV)

2008
($6,400,000)

($6,400,000)

Cash Flows
2011

2009

2010

2012

$1,355,800

$1,619,700

$1,541,999

$1,506,793

$1,355,800

$1,619,700

$1,541,999

$1,506,793

Net Present Value (NPV)


IRR
MIRR
PI

($403,356.21)
14.57%
15.53%
0.94

The project SHOULD NOT be accepted. The most important thi


when deciding to accept or reject a project is the NPV. With the
Specific Discount Rate the NPV is now negative generating a lo
the project and it should not be accepted.

6
8.92%
$446,000
$446,000
$669,500

7+8
13.39%
$669,500

$669,500

Cash Flows
2013

2014

584,929
$16.00
$1,051,010

608,326
$16.00
$1,061,520

$9,358,868
6,434,222
700,000
446,500
1,778,146
711,259
$1,066,888

$9,733,223
6,691,591
700,000
446,000
1,895,632
758,253
$1,137,379

446,500
$1,513,388

446,000
$1,583,379

$10,406.04
$0

$10,510.10
$0

$1,502,982

$1,572,869

2013

2014

$1,502,982

$1,572,869
$1,000,000
$417,800

$1,502,982

$2,990,669

st important thing to look at


he NPV. With the new Project
generating a loss of money for

The importance of using the project specific discount rate is to show how the proposed projec
the riskiness of the firm. In this particular when using the project specific discount rate the ne
showed that the project in fact should not be acceped due to an unporfitable NPV. With out th
for the project specific discount rate a wrong decision would have been made and the firm wo
lost money.

w the proposed project will effect


fic discount rate the new firm risk
fitable NPV. With out the adjusting
made and the firm would have