Bellinger Industries is considering two projects for inclusion in its capital bu

Question

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%.

Project A -1,150, 650, 385, 270, 320

Project B -1,150, 250, 320, 420, 770

What is Project A's payback? Round your answer to four decimal places. Do not round your intermediate calculations. ____years???

What is Project A's discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations. _____years???

What is Project B's payback? Round your answer to four decimal places. Do not round your intermediate calculations. _____years???

What is Project B's discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations. _____years???

Explanation / Answer

1.

payback period-Project A

Payback period for project A=2+155/270=2+0.43=2.43 years

2.

Discounted pay back period for Project A=2+206/220=+2+0.94=2.94 years

3.

Pay back period for project B=3+160/770=3+0.21=3.21 years

4.

Discounted pay back period=3+294/587=3+0.5=3.5 Years

1.

payback period-Project A

Year Cash flow Cumalative cash flow 0          -1,150       -1,150 1               650           -500 2               385           -115 3               270            155 4               320            475

Related Questions

Navigate

• Browse (All)
• Browse B
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.