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:

Categorical Imperative

A fundamental principle in the ethical philosophy of Immanuel Kant that requires that individuals act in a manner in which they wish their actions to become universal laws.

Ethical Imperative

A strong moral obligation or duty which compels someone to act in a certain way based on ethical considerations.

Rational Agents

Entities capable of making decisions based on reasoning, often in the context of economic models or artificial intelligence.

Intrinsic Worth

This refers to the inherent value that an entity has, independent of its utility or benefit to others.