Business, 08.11.2019 06:31 embersongracie

Wilson co. is considering two mutually exclusive projects. both require an initial investment of $10,000 at t = 0. project x has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,500 at the end of years 1 and 2, respectively. in addition, project x can be repeated at the end of year 2 with no changes in its cash flows. project y has an expected life of 4 years with after-tax cash inflows of $4,600 at the end of each of the next 4 years. each project has a wacc of 11%. what is the equivalent annual annuity of the most profitable project? a. $1,345.50b. $1,346.30c. $1,361.52d. $1,376.74e. $1,411.15

Answers: 1

Show answers

Answers

Answer from: meganwintergirl

d. $1,376.74

Explanation:

NPV of Project X is

YearCash outflow/inflowPresent value factor Present value

0 -$10,000.00 1 -$10,000.00

1 $6,000.00 0.900901 $5,405.41

2 $8,500.00 0.811622 $6,898.79

NPV $2,304.20

NPV of Project Y is

YearCash outflow/inflowPresent value factor Present value

0 -$10,000.00 1 -$10,000.00

1 $4,600.00 0.900901 $4,144.14

2 $4,600.00 0.811622 $3,733.46

3 $4,600.00 0.731191 $3,363.48

4 $4,600.00 0.658731 $3,030.16

Total $4,271.25

Formula for calculation of Equivalent annual annuity is given by:

C = r*(NPV)/(1-(1+r)-n)

Applying the formula for project X, NPV =$2304,20

r = 11%, n = 2

Substituting the values in the above formula

C = 11%*$2304,20/(1-(1+11%)-2

=$1345.38

Applying the formula for project Y, NPV =$4271.25

r = 11%, n = 4

Substituting the values in the above formula

C = 11%*$4271.25/(1-(1+11%)-4

= $1376.74

Therefore, most profitable project is Y and its equivalent annual annuity = $1376.74.

Answer from: Quest

answer; i believe the correct answer is (75 years);

Answer from: Quest

enjoy the dunce cap fool

Another question on Business

Business, 22.06.2019 11:00

The following transactions occurred during july: received $1,000 cash for services provided to a customer during july. received $4,000 cash investment from bob johnson, the owner of the business received $850 from a customer in partial payment of his account receivable which arose from sales in june. provided services to a customer on credit, $475. borrowed $7,000 from the bank by signing a promissory note. received $1,350 cash from a customer for services to be rendered next year. what was the amount of revenue for july?

Answers: 1

Answer

Business, 22.06.2019 12:40

Kumar consulting operates several stock investment portfolios that are used by firms for investment of pension plan assets. last year, one portfolio had a realized return of 12.6 percent and a beta coefficient of 1.15. the average t-bond rate was 7 percent and the realized rate of return on the s& p 500 was 12 percent. what was the portfolio's alpha?

Answers: 1

Answer

Business, 22.06.2019 14:40

You are purchasing a bond that currently sold for $985.63. it has the time-to-maturity of 10 years and a coupon rate of 6%, paid semi-annually. the bond can be called for $1,020 in 3 years. what is the yield to maturity of this bond?

Answers: 2

Answer

Business, 22.06.2019 20:40

On january 1, 2017, pharoah company issued 10-year, $2,020,000 face value, 6% bonds, at par. each $1,000 bond is convertible into 16 shares of pharoah common stock. pharoah’s net income in 2017 was $317,000, and its tax rate was 40%. the company had 97,000 shares of common stock outstanding throughout 2017. none of the bonds were converted in 2017. (a) compute diluted earnings per share for 2017. (round answer to 2 decimal places, e.g. $2.55.) diluted earnings per share

Answers: 3

Answer

You know the right answer?

Wilson co. is considering two mutually exclusive projects. both require an initial investment of $10...

Questions