Mulroney Corp. is considering two mutually exclusive projects. Both require an i
ID: 2668113 • Letter: M
Question
Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,900 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,300 at the end of each of the next 4 years. Each project has a WACC of 11.00%. Use the replacement chain approach to determine the NPV of the most profitable project.Answer
$2,573
$3,341
$3,809
$3,141
$3,909
Explanation / Answer
Mulroney Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $7,900 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,300 at the end of each of the next 4 years. Each project has a WACC of 11.00%. Use the replacement chain approach to determine the NPV of the most profitable project.
Answer
$2,573
$3,341
$3,809
$3,141
$3,909
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