Atlas Corp

question 22

Multiple Choice

Atlas Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project S 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 L has an expected life of 4 years with after-tax cash inflows of $4,373 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 NPVL - NPVS?

• A) $56.50
• B) $62.15
• C) $68.37
• D) $75.21
• E) $82.73

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Definitions:

Oligopolistic Firms

Companies operating in a market structure characterized by a small number of entities dominating the industry, often resulting in limited competition.

Collusively

Acting in a coordinated manner, often secretly, between firms to set prices or market conditions, usually to the detriment of competition.

Oligopolistic Firms

Companies that operate in a market structure characterized by a small number of firms dominating the market, leading to limited competition.

Pure Monopoly

A market structure where a single supplier dominates the market, offering a unique product with no close substitutes.