​Wilson Co

question 22

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.In addition,Project X can be repeated at the end of Year 2 with no changes in its cash flows.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

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Definitions:

Dividend Yield

A ratio demonstrating how much a company disburses in dividends annually in comparison to its stock price.

Total Asset Turnover

A financial ratio that measures the efficiency of a company in using its assets to generate sales revenue, calculated by dividing sales by total assets.

Inventory Turnover

A financial ratio indicating the number of times a company's inventory is sold and replaced over a period.

Debt Ratio

A financial ratio that measures the extent of a company’s or individual's leverage, calculated by dividing total liabilities by total assets.