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Exam 23: Comparing Two Mutually Exclusive Projects: NPV and Equivalent Annual Annuity Analysis

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Exam 23: Comparing Two Mutually Exclusive Projects: NPV and Equivalent Annual Annuity Analysis2 Questionsadd course
Exam 24: Financial Leverage and Operating Leverage23 Questionsadd course
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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.

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D

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.

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