Wilson Co Is Considering Two Mutually Exclusive Projects

question 5

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. 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:

Benefit Format

The structure or manner in which employee benefits are organized, offered, and communicated within an organization.

Employment Insurance

A government program offering temporary financial assistance to unemployed workers who meet certain eligibility criteria.

Legally Required

Mandates or obligations imposed by law that individuals, organizations, or entities are required to follow.

Overall Strategy

Encompasses the broad, long-term action plans and decisions made by an organization to achieve its major goals and objectives.