Bellinger Industries is considering two projects for inclusion in its capital bu
ID: 2765150 • Letter: B
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 11%.
What is Project A's payback? Round your answer to four decimal places. Do not round your intermediate calculations.
years
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Partially Correct
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Review the payback definition.
The solution for payback is a number not a percentage rate or dollar value.
The payback calculation is not dependent on the firm's WACC.
Don't forget the minus sign for the Year 0 cash flow.
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Solution
What is Project A's discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations.
years
Hide FeedbackShow All Feedback
Incorrect
Check My Work Feedback
Review the discounted payback definition.
The solution for discounted payback is a number not a percentage rate or dollar value.
The discounted payback calculation is dependent on the firm's WACC.
Don't forget the minus sign for the Year 0 cash flow.
Post Submission Feedback
Solution
What is Project B's payback? Round your answer to four decimal places. Do not round your intermediate calculations.
years
Hide FeedbackShow All Feedback
Incorrect
Check My Work Feedback
Review the payback definition.
The solution for payback is a number not a percentage rate or dollar value.
The payback calculation is not dependent on the firm's WACC.
Don't forget the minus sign for the Year 0 cash flow.
Post Submission Feedback
Solution
What is Project B's discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations.
years
Explanation / Answer
Payback Period = 3 + (15/340) = 3.044 years
Payback period = 3 + (330 / 790) = 3.42 Years
discounted payback = more than 4 years
Discounted Payback = More than 4 years
Project A Year Cash Flow Cumulative Cash Flow 0 -1450 -1450 1 700 -750 2 445 -305 3 290 -15 4 340 325Related Questions
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