Carlyle Inc

question 23

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.Each project has a WACC of 9%.What is the equivalent annual annuity of the most profitable project?

• A)​$569.67
• B)​$792.34
• C)​$865.31
• D)​$1,522.18
• E)​$1,846.54

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Definitions:

Standard Deviations

A statistical measure of the dispersion or variability in a data set, often used in finance to represent the volatility or risk of an investment.

Asset Classes

Categories of assets, such as stocks, bonds, real estate, and commodities, that exhibit different characteristics, behaviors, and risk profiles.

Corporate Bonds

Bonds issued by corporations to finance their operations, typically with a fixed interest rate.

Risk Premium

The extra amount of return demanded by investors for taking on a higher level of risk.