Problem:
Atlas Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $6,000 and $8,000 at the end of Years 1 and 2, respectively. Project L has an expected life of 4 years with after-tax cash inflows of $4,373 at the end of each of the next 4 years. Each project has a WACC of 9.25%, and Project S can be repeated with no changes in its cash flows. The controller prefers Project S, but the CFO prefers Project L.
Required:
Question: How much value will the firm gain or lose if Project L is selected over Project S, i.e., what is the value of NPVL - NPVS?
A. 56.50
B. 62.15
C. 68.37
D. 75.21
E. 82.73
Note: Solve the problem and show all work.