Carolina Company Is Considering Projects S and L,whose Cash Flows

question 76

Multiple Choice

Carolina Company is considering Projects S and L,whose cash flows are shown below.These projects are mutually exclusive,equally risky,and are not repeatable.If the decision is made by choosing the project with the higher IRR,how much value will be forgone? Note that under some conditions choosing projects on the basis of the IRR will cause $0.00 value to be lost. $\begin{array}{lccccc}\text { WACC: } & 7.75 \% \\\text { Year } & 0 & 1 & 2 & 3 & 4 \\\mathrm{CF}_{\mathrm{S}} & -\$ 1,050 & \$ 675 & \$ 650 & & \\\mathrm{CF}_{\mathrm{L}} & -\$ 1,050 & \$ 360 & \$ 360 & \$ 360 & \$ 360\end{array}$

• A) $11.45
• B) $12.72
• C) $14.63
• D) $16.82
• E) $19.35

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Definitions:

Uterine Body

The main, central part of the uterus, where implantation and fetal development occur.

Fertilized Ova

A zygote formed through the union of a sperm and an egg, marking the beginning of a human life.

Strategic Alliance

A formal agreement between two or more parties to pursue a set of agreed objectives while remaining independent organizations.

IPO

Initial Public Offering, a process by which a private company offers shares to the public in a new stock issuance.