Atlas Corp

Multiple Choice

Atlas Corp.is considering two mutually exclusive projects.Both require an initial investment of $11,500 at t = 0.Project S has an expected life of 2 years with after-tax cash inflows of $5,800 and $7,700 at the end of Years 1 and 2,respectively.Project L has an expected life of 4 years with after-tax cash inflows of $4,136 at the end of each of the next 4 years.Each project has a WACC of 9.25%,and Project S can be repeated with no changes in its cash flows.The controller prefers Project S,but the CFO prefers Project L.How much value will the firm gain or lose if Project L is selected over Project S,i.e. ,what is the value of NPV_L - NPV_S?

A) $1,064.93
B) $1,199.73
C) $367
D) $1,428.90
E) $1,321.06