Question

Viena is considering tuo mdually urdusive projeds Both require an initial investment of $11,000, and their risks are average for the firm. Project X has an expede. 2 years with its tax cash rows of $5,000 and 58 785 at the end of Years 1 and 2 respectively, Project Y has an expected life of 4 years with after- as chrowd54758 a be end of each di the next 4 years. The firm's WACC is 9200%. Determine the equivalent annual annuity of the most profitable project points) 09164128 1053 13ATS QUESTION 14 101615 n nanti = 2% 296 Posh what is the stocks expeded capital gains yield for the coming year 15 points)

Answer 1

13)

Year Project X PVIF @ 9.2% Present value 0 $ (11,000) 1.000 $ (11,000.00) 1 $ 6,000 0.916 $ 5,494.51 2 $ (2,215) 0.839 $ (1,857.50) 3 $ 6,000 0.768 $ 4,607.69 4 $ 8,785 0.703 $ 6,178.05 Year Project Y PVIF @ 9.2% Present value 0 $ (11,000) 1.000 $ (11,000.00) 1 $ 4,750 0.916 $ 4,349.82 2 $ 4,750 0.839 $ 3,983.35 3 $ 4,750 0.768 $ 3,647.76 4 $ 4,750 0.703 $ 3,340.44 - Net present value $ 3,422.75 Net present value $ 4,321.36 -PVIFA (9.2%,4) 3.226 :PVIFA (9.2%,4) 3.226 Equalent annual annuity | $ 1,061.14 Equalent annual annuity | $ 1,339.73 Hence, correct option is $1,339.73

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