Moerdyk & Co. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made by choosing the project with the higher IRR, how much value will be forgone? Note that under certain conditions choosing projects on the basis of the IRR will not cause any value to be lost because the one with the higher IRR will also have the higher NPV, i.e., no conflict will exist. WACC: 6.75% 0 1 2 3 4 CFS -$1,025 $650 $450 $250 $50 CFL -$1,025 $100 $300 $500 $700

a. $63.20 b. $0.00 c. $59.20 d. $55.46 e. $154.01

Your company, CSUS Inc., is considering a new project whose data are shown below. The required equipment has a 3-year tax life. Under the new law, the equipment used in the project is eligible for 100% bonus depreciation, so the equipment will be fully depreciated at t = 0. The equipment has no salvage value at the end of the projects life, and the project does not require any additional operating working capital. Revenues and operating costs are expected to be constant over the project's 10-year expected operating life. What is the project's Year 4 cash flow?

Equipment cost	$70,000
Sales revenues, each year	$37,500
Operating costs	$21,300
Tax rate	25.0%

a. $12,150

b. $16,200

c. $17,983

d. $12,960

e. $20,250

Carlyle Inc. is considering two mutually exclusive projects. Both require an initial investment of $14,200 at t = 0. Project S has an expected life of 2 years with after-tax cash inflows of $7,400 and $13,000 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 after-tax cash inflows $5,500 at the end of each of the next 4 years. Each project has a WACC of 9%. What is the equivalent annual annuity of the most profitable project? Do not round your intermediate calculations.

a. $1,478.81

b. $2,007.17

c. $2,673.68

d. $2,914.32

e. $1,116.90