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Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' after -
Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Both projects' aftertax 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 year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is
What is Project As IRR? Do not round intermediate calculations. Round your answer to two decimal places.
What is Project Bs IRR? Do not round intermediate calculations. Round your answer to two decimal places.
If the projects were independent, which projects would be accepted according to the IRR method?
If the projects were mutually exclusive, which projects would be accepted according to the IRR method?
Could there be a conflict with project acceptance between the NPV and IRR approaches when projects are mutually exclusive?
The reason is Select
Reinvestment at the
is the superior assumption, so when mutually exclusive projects are evaluated the
approach should be used for the capital budgeting decision.
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