Wilson CoIs Considering Two Mutually Exclusive Projects

question 1

Multiple Choice

Wilson Co.is considering two mutually exclusive projects.Both require an initial investment of $11,000,and their risks are average for the firm.Project X has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,785 at the end of Years 1 and 2,respectively.Project Y has an expected life of 4 years with after-tax cash inflows of $4,750 at the end of each of the next 4 years.The firm's WACC is 9.200%.Determine the equivalent annual annuity of the most profitable project.

• A) $1,661.26
• B) $1,192.36
• C) $1,607.67
• D) $1,339.73
• E) $1,393.32

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Definitions:

Hawthorne Experiment

A five-year study conducted at the Western Electric plant in Hawthorne, Illinois, that showed that workers performed better when someone was paying attention to them.

Elton Mayo

A pioneering researcher in organizational theory, particularly known for his work on the Hawthorne Studies, which highlighted the importance of social relations in the workplace.

Mutual Respect

A reciprocal understanding and recognition of the value and importance of others, fostering positive relationships and communication.

Theory Y

A management approach that assumes employees are motivated, self-directed, and enjoy the work they do, advocating for a participative style.