Question

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 10%.

	0		1		2		3		4
Project A	-1,100		700		420		250		300
Project B	-1,100		300		355		400		750

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 your answer to four decimal places.

_____________years

Answer 1

D15 fix =2+116.53/187.83 AB C D 1 A 2 year Cash flows pv@10% Present value Cumulative Cash flows Discounted Cumulative Cash Flows (1,100.00) 1.0000 $ (1,100.00) $ (1,100.00) $ (1,100.00) 700.00 0.9091 $ 636.36 $ (400.00) $ (463.64) 420.00 0.8264 $ 347.11 $ 20.00 $ (116.53) 250.00 0.7513 $ 187.83 $ 270.00 $ 71.30 | 0.6830$ 204.90 $ 570.00 $ 276.20 8 IRR 23.73% NPV $ 276.20 4 Payback Period 1+400/420 1.9524 Years 14 Discounted Payback = 2+116.53/187.83 2.6204 Years 15

D15 fax =2+116.53/187.83 А в E pv@10% 1A 2 year 30 4 1 5 2 63 Cash flows -1100 700 420 250 300 =IRR(B3:37) =C3/1.1 =C4/1.1 C5/1.1 =C6/1.1 NPV Present value =B3*C3 =B4*C4 =B5*C5 =B6*C6 =B7*C7 =SUM(D3:07) Cumulative Cash flows Discounted Cumulative Cash Flows =B3 =D3 =E3+B4 =F3+D4 =E4+B5 =F4+D5 =E5+B6 =F5+D6 =E6+B7 =F6+D7 7 8 IRR Payback Period 1+400/420 =1+0.952380952380952 Years Discounted Payback 2+116.53/187.83 =2+116.53/187.83 IYears 15 16

LIPDUdlu PUPIL Algieril Number 015 - fx =3+233.36/512.26 B 1 B 2 year Cash flows pv@10% Present value Cumulative Cash flows Discounted Cumulative Cash Flows (1,100.00) 1.0000 $ (1,100.00) $ (1,100.00) $ (1,100.00) 4 1 $ 300.00 0.9091 $ 272.73 $ (800.00) $ (827.27) 2 $ 355.00 0.8264 $ 293.39 $ (445.00) $ (533.88) - 3 $ 400.00 0.7513 $ 300.53 $ (45.00) $ (233.36) 7 4 $ 750.00 0.6830$ 512.26 $ 705.00 $ 278.90 8 IRR 19.57% NPV $ 278.90 Payback Period 3+45/750 12 3.0600 Years 13 Discounted Payback 14 15 3+233.36/512.26 3.4555. Years 16

D15 fc =3+233.36/512.26 pv@10% Cash flows -1100 300 1 B 2 year 30 4 1 52 63 7 4 8 IRR 9 Present value =B3*C3 =B4*04 =B5*C5 =B6*C6 =B7*C7 =SUM(D3:07) Cumulative Cash flows =B3 =E3+B4 =E4+B5 =E5+B6 =E6+B7 =C3/1.1 =C4/1.1 C5/1.1 =C6/1.1 NPV 355 Discounted Cumulative Cash Flows =D3 =F3+D4 =F4+D5 =F5+D6 =F6+D7 400 750 =IRR(B3:37) Payback Period 3+45/750 =3+0.06 Years Discounted Payback 14 15 16 3+233.36/512.26 =3+233.36/512.26 Years