# finance

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. Project L has an expected life of 4 years
with after-tax cash inflows of \$5,200 at the end of each of the next 4 years. Each project has a
WACC of 9.00%, and neither can be repeated. The controller prefers Project S, but the CFO
prefers Project L. 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. \$262.74
b. \$291.93
c. \$324.37
d. \$356.80
e. \$392.48

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1. c

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posted by hd
2. Foley systems is considering a new investment whose data are shown below. The equipment would be depreciated on a straight-line basis over the project'S 3 years life, would have a zero salvage value, and would require no additional net operating working capital. Revenues and operating costs are expected to be constant over the project'S life.. the tax rate is 34%. What is the NPV,IRR, AND probability index?
Cost of capital. 10%
Net investment. 75,000
Revenue. 75,000
Other options costs. 25,000
Depreciation rate. 33.33%
Tax rate. 35%

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posted by Jay

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