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 $10,500,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 11.00%.Determine the equivalent annual annuity of the most profitable project.Do not round your intermediate calculations.

• A) $1,474.82
• B) $1,351.92
• C) $1,543.10
• D) $1,365.57
• E) $1,570.41

---

Definitions:

Tax Increases

Governmental action to raise the amount of money collected from taxes, often affecting income, sales, or property taxes.

Deadweight Loss

An inefficiency in the market where the total surplus of producer and consumer is not maximized due to factors like taxes or subsidies.

Elastic Demand

A situation where the quantity demanded of a good or service significantly changes in response to a change in price.

Equilibrium Price

The price at which the quantity of a product offered is equal to the quantity of the product in demand.