Question:
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 year with after tax cash inflows of 7,000 and 12,000 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 of 5,200 at the end of each next 4 years each project has a WAAC of 9%.
What is the equivalent annual annuity of the most profitable project?