Question:
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 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 year 2 with no changes in its cash flows.
Project L has an expected life of 4 years with after tax cash flows of 5,200 at the end of each year of the next 4 years.
Each project has a WAAC 9%.
What is the equivalent annual annuity of the most profitable project.?