Payback was the earliest -Select- selection criterion. The -Select is a break-even" calculation in the sense that if a project's cash flows come in at the expected rate, the project will break even. The equation is: Number of Uncovered at start of your Payback = years prior to + Cash flow during full recovery year full recovery The -Select a project's payback, the better the project is. However, payback has 3 main disadvantages: (1) Dollars received in different years are given -Select-weight. (2) Cash flows beyond the payback year are ignored. (3) The payback merely indicates when a project's investment is recovered. There is no necessary relationship between a given payback and investor wealth maximization. A variant of the regular payback is the discounted payback. Unlike regular payback, the discounted payback considers - Select costs. However, the discounted payback stili disregards cash flows Select the payback year. In addition, there is no specific payback rule to justify project acceptance. Both methods provide information about -Select- and risk 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 12%. 0 1 3 4 Project A -950 700 350 220 270 Project B -950 300 285 370 720 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 omework Payback was the earliest -Select- selection criterion. The -Select- is a "break-even calculation in the sense that if a project's cash flows come in at the expected rate, the project will break even. The equation is: Number of Uncovered car of year Payback = years prior to + Cash flow during full recovery year full recovery The Select a project's payback, the better the project is. However, payback has 3 main disadvantages: (1) Dollars received in different years are given -Select-weight. (2) Cash flows beyond the payback year are ignored. (3) The payback merely indicates when a project's investment is recovered. There is no necessary relationship between a given payback and investor wealth maximization A variant of the regular payback is the discounted payback. Unlike regular payback, the discounted payback considers -Select costs. However, the discounted payback stil disregards cash flows - Select the payback year. In addition, there is no specific payback rule to justify project acceptance. Both methods provide information about Select and risk 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 inclu 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 12%. 0 1 2 3 4 1 1 Project A -950 700 350 220 270 Project B -950 300 285 370 720 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