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Hampton Corp. is considering two mutually exclusive projects. Both require an initial investment of $10,000 at t=0. Project X has an expected life of 2 years with after-tax cash inflow of $6,000 and $7,900 at the end of Years 1 and 2, respectively. In addition, Project X can be repeated at the end of Year 2 with no changes in its cash flows. Project Y has an expected life of 4 years with after-tax cash inflows of $4,300 at the end of each of the next 4 years. Each project has a WACC of 8%.

Required:

Question: Using the replacement chain approach, what is the NPV of the most profitable project?

Note: Explain in detail.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91173240

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