​Atlas Corp

question 46

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 NPV_L - NPV_S?

• A)$56.50
• B)$62.15
• C)$68.37
• D)$75.21
• E)$82.73

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Definitions:

Paid-In Capital

The total amount of money shareholders have invested in a company in exchange for equity, including shares at par value and additional paid-in capital.

Treasury Stock

Treasury stock refers to shares that were issued and subsequently reacquired by the issuing company, reducing the amount of outstanding stock on the open market.

Reissuance

The process of re-releasing previously issued shares back into the market, often after they've been bought back by the company.

Treasury Stock

Shares that were once issued and outstanding but were later bought back by the company, reducing the amount of outstanding stock on the open market.