Question
Bell 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
Bell 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. Bell WACC is 7%.
Project A | -1,150 | 650 | 375 | 290 | 340 |
Project B | -1,150 | 250 | 310 | 440 | 790 |
Answer the following. Do not round your intermediate calculations. Round your answer to three decimal places.
What is Project A's payback? ______ years.
What is Project A's discounted payback? ________ years.
What is Project B's payback? ______ years.
What is Project B's discounted payback? _______years.
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