Mulroney Corp. is considering two mutually exclusive projects. Both require an i

Question

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 $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,000 at the end of each of the next 4 years. The firm’s WACC is 8%. Use the replacement chain to determine the NPV of the most profitable project.

Explanation / Answer

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 $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project Y has an expected life of 4 years with after-tax cash inflows of $4,000 at the end of each of the next 4 years. The firm’s WACC is 8%. Use the replacement chain to determine the NPV of the most profitable project.

answer :5897 dollars

Related Questions

Navigate

• Browse (All)
• Browse M
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.