Carlyle Inc

question 38

Multiple Choice

Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $15,000 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $7,000 and $12,000 at the end of Years 1 and 2, respectively. In addition, Project S can be repeated at the end of Year 2 with no changes in its cash flows. Project L has an expected life of 4 years with after-tax cash inflows of $5,200 at the end of each of the next 4 years. Each project has a WACC of 9.00%. What is the equivalent annual annuity of the most profitable project?

• A) $ 569.97
• B) $ 782.34
• C) $ 865.31
• D) $1,522.18
• E) $1,846.54

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Definitions:

Multiple Product

The offering or production of more than one type of product by a company.

Capacity Constraints

Limitations on the maximum output or production an organization can achieve due to current resources and operational capabilities.

Price to Capacity

The pricing strategy based on the production capacity of a company, often used in industries with significant fixed costs.

Parking Rates

the fee charged for the use of a parking space, typically determined by duration and location.