5. Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $14,800 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $7,200 and $12,700 at the end of Years 1 and 2, respectively. In addition, Project S can be repeated at the end of Year 2 with no changes in its cash flows. Project L has an expected life of 4 years with after-tax cash inflows of $5,600 at the end of each of the next 4 years. Each project has a WACC of 9%. What is the equivalent annual annuity of the most profitable project? a. 1,418.24 b. 1,042.02 c. 1,560.06 d. 1,162.96 e. 1,031.70
5. Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $14,800 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $7,200 and $12,700 at the end of Years 1 and 2, respectively. In addition, Project S can be repeated at the end of Year 2 with no changes in its cash flows. Project L has an expected life of 4 years with after-tax cash inflows of $5,600 at the end of each of the next 4 years. Each project has a WACC of 9%. What is the equivalent annual annuity of the most profitable project? a. 1,418.24 b. 1,042.02 c. 1,560.06 d. 1,162.96 e. 1,031.70
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 2PB: Markoff Products is considering two competing projects, but only one will be selected. Project A...
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