Wilson Co Is Considering Two Mutually Exclusive Projects

Multiple Choice

Wilson Co. 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 $8,500 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,600 at the end of each of the next 4 years. Each project has a WACC of 11%. What is the equivalent annual annuity of the most profitable project?

A) $1,345.50
B) $1,346.30
C) $1,361.52
D) $1,376.74
E) $1,411.15