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 timeline 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%. Project A Project B -1,200 -1,200 600 410 400 330 230 210 300 740 What is Project Delta's IRR? Do not round intermediate calculations. Round your answer to two decimal places What is the significance of this IRR? B. after this point when mutually exclusive projects are considered there is no conflict in project acceptance between the NPV and IRR It is the Select approaches. Review the graphs below. Select the graph that correctly represents the correct NPV profile for Projects A and B by using the following drop down menu. -Select- NPV Profiles A NPV Profiles B NPVIS 600 500 NPV S 600 500 4004 3001 2001 1001 300 2007 100 10 20 3530 * 20 25 30 1.100 -1001

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

CROSS OVER RATE WHERE BOTH PROJECTS HAVE SAME NPV THAT IS BOTH NPV LINES INTERSECT EACH OTHER. THIS IS IN GRAPH B.

projects (Autosaved) (Autosaved) (Autosaved) - Microsoft Excel (Product Activation Failed) Data Review View Add-Ins File Home Insert Page Layout Formulas - 2x % Cut 4.0 .00 :.: Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Cells PU PV PW PX 5 Calibri 11 A A = = = V Wrap Text General E Copy Paste BI U D- DA E E E s FMerce Format Painter Merge & Center - Center $ % % , Clipboard Font Alignment Number PV15 POPP PQ PR PS PT 1 BELLINGER project project incremental CFAT year B-A 0 -1200 -1200 1 600 410 -190 2 400 330 -70 210 -20 300 740 440 M + 230 0 excel formula IRR(PS4:PS8) delta IRR 18.69% 10 11 12 13 14 15 16 significant of delta IRR it is THE CROSSOVER RATE after this point that NPV & IRR methods agree and there is no conflict in project acceptance correct graph: CROSS OVER RATE IS 18.69% SO ANSWER: GRAPH B 17 18 19 invest, EAA MI-np-ir REPLACEMENT S HPR GMAM EAC MACRS NPV RELEVANT BETA LEVERED REPLACEMENT BOND STEIN II I RRnpvbeta RATION PBP ARR ferences: E147 OPTION TO WAIT BOU 130% Rea 0 DO 4 ...ll * 4 * ENG 21-11-2019