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Web App 12E
1. Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000, and their
risks are average for the firm. Project X has an expected life of 2 years with after-tax cash inflows of $5,300 and $7,000 at
the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $3,500 at
the end of each of the next 4 years. The firm's WACC is 7.6%. Use the replacement chain to determine the NPV of the
most profitable project.
a.
$2,155.12
b.
$1,937.80
c.
$1,430.71
d.
$1,901.58
e.
$1,811.03
2. Wilson Co. is considering two mutually exclusive projects. Both require an initial investment of $11,000, and their risks
are average for the firm. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,785 at the
end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,750 at the
end of each of the next 4 years. The firm's WACC is 9.200%. Determine the equivalent annual annuity of the most
profitable project.
Web App 12E
a.
$1,661.26
b.
$1,192.36
c.
$1,607.67
d.
$1,339.73
e.
$1,393.32
