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Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
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Phoniex University
Oct-2001 - Nov-2016
chapter 11
2. 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%.
| Â | 0 | 1 | 2 | 3 | 4 | |||||
| Â | Â | Â | Â | Â | Â | Â | Â | Â | Â | Â |
| Project A | -1,300 | 650 | 440 | 290 | 340 | |||||
| Project B | -1,300 | 250 | 375 | 440 | 790 | |||||
a. What is Project A's payback? Round your answer to four decimal places. Do not round your intermediate calculations.
=years
b. What is Project A's discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations.
=years
c. What is Project B's payback? Round your answer to four decimal places. Do not round your intermediate calculations.
=years
d. What is Project B's discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations.
= years
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