Question: Your company, RMU Inc., is considering a new project whose data are shown below. Under the new tax law, the equipment used in the project

Your company, RMU Inc., is considering a new project whose data are shown below. Under the new tax law, the equipment used in the project is eligible for 100% bonus depreciation, so it will be fully depreciated at t = 0. What is the project's Year 1 cash flow?

Sales revenues	$24,450
Operating costs	$11,950
Tax rate	25.0%

a. $15,625

b. $12,500

c. $6,388

d. $9,375

e. $10,000

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

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