1. Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $15,000 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $7,000 and $12,000 at the end of Years 1 and 2, respectively. In addition, Project S can be repeated at the end of Year 2 with no changes in its cash flows. Project L has an expected life of 4 years with expected cash flows of $5,200 per year. Each project has a WACC of 9%. What is the equivalent annual annuity of the most profitable project?
A. $569.67 B. $792.34 C. $865.31 D. $1,522.18
2. Following previous question, using the replacement chain approach, what is the NPV of the most profitable project?
A. $1,522.18 B. $1,846.54 C. $2,385.64 D. $2,803.37