#8 A firm has two mutally exclusive investment Projects to evaluate. The projects have the following cash flows: KEDA idom Time After-tax cash Flow X After-tax Cash Flow Y 0 -$100,000 1 2MATION 3 4 5 40,000 60,000 70,000 04 E $80,000 35,000 35,000 w x 35,000 Allind 35,000 be Projects X and Y are equally risky and may repeated indefinitely. If the firm's WACC is 13% what is the EAA of the project that adds the most value to the firm? Do not round intermediate 35,000 Calculations. Round your answer to the nearest dollar. •Project X or Y EAA = $

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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#8

A firm has two mutually exclusive investment projects to evaluate. The projects have the following cash flows:

| Time | After-tax Cash Flow X | After-tax Cash Flow Y |
|------|-----------------------|-----------------------|
| 0    | -$100,000             | -$80,000              |
| 1    | $40,000               | $35,000               |
| 2    | $60,000               | $35,000               |
| 3    | $70,000               | $35,000               |
| 4    | —                     | $35,000               |
| 5    | —                     | $35,000               |

Projects X and Y are equally risky and may be repeated indefinitely. If the firm's WACC is 13%, what is the EAA of the project that adds the most value to the firm? Do not round intermediate calculations. Round your answer to the nearest dollar.

- Project X or Y
- EAA = $ ______
Transcribed Image Text:#8 A firm has two mutually exclusive investment projects to evaluate. The projects have the following cash flows: | Time | After-tax Cash Flow X | After-tax Cash Flow Y | |------|-----------------------|-----------------------| | 0 | -$100,000 | -$80,000 | | 1 | $40,000 | $35,000 | | 2 | $60,000 | $35,000 | | 3 | $70,000 | $35,000 | | 4 | — | $35,000 | | 5 | — | $35,000 | Projects X and Y are equally risky and may be repeated indefinitely. If the firm's WACC is 13%, what is the EAA of the project that adds the most value to the firm? Do not round intermediate calculations. Round your answer to the nearest dollar. - Project X or Y - EAA = $ ______
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