Mulroney Corp

question 2

Multiple Choice

Mulroney Corp.is considering two mutually exclusive projects.Both require an initial investment of $10,000,and their risks are average for the firm.Project X has an expected life of 2 years with after-tax cash inflows of $5,300 and $7,000 at the end of Years 1 and 2,respectively.Project Y has an expected life of 4 years with after-tax cash inflows of $3,500 at the end of each of the next 4 years.The firm's WACC is 7.6%.Use the replacement chain to determine the NPV of the most profitable project.

• A) $2,155.12
• B) $1,937.80
• C) $1,430.71
• D) $1,901.58
• E) $1,811.03

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Definitions:

Contribution

An addition or support provided to something, often referring to the role or impact one element brings to an overall outcome or project.

Binomial Random Variable

A type of random variable that results from a binomial experiment, defined by a fixed number of trials, two possible outcomes per trial, constant probability of success, and independence between trials.

Random Sample

A sample that ensures each member of the population has an equal chance of being included.

Probability

A quantification of the probability that a specific event happens, denoted by a value ranging from 0 to 1.