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:

Cross-Price Elasticity

A measure of how much the quantity demanded of one good responds to a change in the price of another good.

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Price-Inelastic

A description of a good or service whose demanded quantity does not significantly change when its price changes, indicating low sensitivity to price.

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The act of buying books required for academic study, often specified by educational institutions.