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 8%. 0 2 3 4 1 -950 610 365 270 320 Project A Project B -950 210 300 420 770 What is Project A's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. $ What is Project B's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations. $ If the projects were independent, which project(s) would be accepted? -Select- If the projects were mutually exclusive, which project(s) would be accepted? -Select- 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 9%. 2 0 1 3 Project A Project B - 1,100 - 1,100 600 200 360 295 270 420 290 740 What is Project A's IRR? Do not round intermediate calculations. Round your answer to two decimal places. % What is Project B's IRR? Do not round intermediate calculations. Round your answer to two decimal places. % If the projects were independent, which project(s) would be accepted according to the IRR method? -Select- If the projects were mutually exclusive, which project(s) would be accepted according to the IRR method? -Select- Could there be a conflict with project acceptance between the NPV and IRR approaches when projects are mutually exclusive? -Select- The reason is -Select- is the superior assumption, so when mutually exclusive projects are evaluated the -Select- approach should be used for Reinvestment at the -Select- the capital budgeting decision. 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%. 2 3 4 ii 600 400 230 300 Project A Project B -1,200 -1,200 410 330 210 740 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? after this point when mutually exclusive projects are considered there is no conflict in project acceptance between the NPV and It is the -Select- IRR 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 INPV ($) 600 + ENPV (5) 6001 500 500 400 400 300 300 200 200 100 100 5 10 15 20 25 30 5 10 20 25 30 -100 -100 -200 Cost of Capital (%) -200 Cost of Capital (%) -300 -400+ -300 -400+ NPV Profiles C NPV Profiles D INPV ($ INPV (5) 600 600 500 500 4001 400 300 300 2001 200 100 100 5 10 15 20 25 30 5 10 20 25 30 -100 -100 -200 Cost of Capital (%) -200 Cost of Capital (% -300 -400 -300 -400 +
