Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below.Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's averageproject. Bellinger's WACC is 12%.1Project AProject B0|-1,000-1,0001.82 years700300years2+3653003250400What is Project A's payback? Round your answer to four decimal places. Do not round intermediate calculations.years4300750What is Project A's discounted payback? Round your answer to four decimal places. Do not round intermediate calculations.What is Project B's payback? Round your answer to four decimal places. Do not round intermediate calculations.3 yearsWhat is Project B's discounted payback? Round your answer to four decimal places. Do not round intermediate calculations.

Pay back period is a capital budgeting techniques which help in decision making on the basis of…

Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 12%. 1 Project A -1,000 Project B -1,000 1.82 years 0 years 700 300 2 + 365 300 What is Project A's payback? Round your answer to four decimal places. Do not round intermediate calculations. 3 + 250 400 years 4 1 300 750 What is Project A's discounted payback? Round your answer to four decimal places. Do not round intermediate calculations. What is Project B's payback? Round your answer to four decimal places. Do not round intermediate calculations. 3 years What is Project B's discounted payback? Round your answer to four decimal places. Do not round intermediate calculations.

Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 12%. 1 Project A -1,000 Project B -1,000 1.82 years 0 years 700 300 2 + 365 300 What is Project A's payback? Round your answer to four decimal places. Do not round intermediate calculations. 3 + 250 400 years 4 1 300 750 What is Project A's discounted payback? Round your answer to four decimal places. Do not round intermediate calculations. What is Project B's payback? Round your answer to four decimal places. Do not round intermediate calculations. 3 years What is Project B's discounted payback? Round your answer to four decimal places. Do not round intermediate calculations.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

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Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 11%. 2 .!!!!! 590 360 230 300 Project A -1,100 Project B -1,100 3 220 360 280 700 What is Project Delta's IRR? Do not round intermediate calculations. Round your answer to two decimal places.
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 11%. 0 1 2 3 4 Project A -1,050 600 360 300 290 Project B -1,050 200 295 450 740 What is Project A’s IRR? Do not round intermediate calculations. Round your answer to two decimal places. _________ % What is Project B's IRR? Do not round intermediate calculations. Round your answer to two decimal places. _________% If the projects were independent, which project(s) would be accepted according to the IRR method? If the projects were mutually exclusive, which…
The internal rate of return (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows. Consider this case: Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investment of $1,400,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project’s NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama Mining Company’s WACC is 7%, and project Delta has the same risk as the firm’s average project. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $300,000 Year 2 $425,000 Year 3 $400,000 Year 4 $425,000 Q1. Which of the following is the correct calculation of project Delta’s…
Suppose Hungry Whale Electronics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $450,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $350,000 Year 2 $450,000 Year 3 $400,000 Year 4 $475,000 Hungry Whale Electronics's weighted average cost of capital is 7%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value (NPV)? $959,045 $1,309,045 $1,409,045 $1,150,854
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 9%. 0 1 2 3 4 Project A -900 600 365 280 330 Project B -900 200 300 430 780 What is Project A's payback? Do not round intermediate calculations. Round your answer to four decimal places. years What is Project A's discounted payback? Do not round intermediate calculations. Round your answer to four decimal places. years What is Project B's payback? Do not round intermediate calculations. Round your answer to four decimal places. years What is Project B's…
A company is trying to estimate the first-year cash flow (at Year 1) for a proposed project. The financial staff has collected the following information on the project: Sales $16.5 million Optg costs (Excluding Depreciation) $12.8 million $2.8 million Depreciation Interest Expense $2.8 million The company has a 40% tax rate, and its WACC is 11%. What is the project's cash flow in year 1? Express
A company is considering a 10-year capital investment project. The project has annual positive cash flows each year. The accounting manager has calculated the NPV of the same project using three different costs of capital (8%, 10% and 18 %) as discount rates. Select the most logical combination of NPVS from the choices given. Note: You cannot calculate the NPVS nor do you need to. O $(5,743) $3,152 $6,612 O $(5,743) $6,612 $3,152 $3,152 $6,512 $(5,743) O $6,512 $3,152 $(5,743) O None of the above
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 7%. 1 1 -1,250 600 -1,250 200 What is Project A's MIRR? Do not round intermediate calculations. Round your answer to two decimal places. 8 % Project A Project B 0 2 1 395 330 3 + 220 370 4 1 270 720 Show All Feedback What is Project B's MIRR? Do not round intermediate calculations. Round your answer to two decimal places. 9 %
Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are all included in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 9%. 0 2 3 Project A Project B -1,000 -1,000 650 250 430 240 290 365 390 740 What is Project A's payback? Do not round intermediate calculations. Round your answer to four decimal places. years What is Project A's discounted payback? Do not round intermediate calculations. Round your answer to four decimal places. years What is Project B's payback? Do not round intermediate calculations. Round your answer to four decimal places. years What is Project B's discounted payback? Do not round intermediate calculations. Round…
Suppose Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $3,000,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 $375,000 Year 2 $450,000 Year 3 $425,000 Year 4 $475,000 Celestial Crane Cosmetics’s weighted average cost of capital is 10%, and project Beta has the same risk as the firm’s average project. Based on the cash flows, what is project Beta’s NPV? -$1,972,140 $1,356,550 -$1,643,450 -$4,643,450

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