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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%. 0 2 4 700 Project A Project B -1,000 -1,000 415 350 220 370 270 720 300 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 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%. 0 1 2 3 4 370 310 Project A Project B -1,250 -1,250 700 280 200 395 315 750 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? It is the crossover rate crossover rate D, after this point when mutually exclusive projects are considered there is no conflict in project acceptance between the NPV and 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 (5) 600 INPV (5) 6001 5003 400 300+ 2007 1001 5001 400 3007 2007 100+ 5 10 15 20 25 30 5 10 20 25 30 -100 -200 Cost of Capital (%) -1001 -2007 Cost of Capital -3001 -300 -400+ -4001 NPV Profiles C NPV Profiles D NPV Profiles C NPV Profiles D #NPV (5) INPV (5) 600 600 500 500 400 400 300 300 200 200 100 100 5 10 20 25 30 5 10 20 25 30 -100 -100 -200 Cost of Capital (%) -200 Cost of Capital% -300 -400 -300 -400 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%. 0 2 4 700 Project A Project B -1,000 -1,000 415 350 220 370 270 720 300 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 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%. 0 1 2 3 4 370 310 Project A Project B -1,250 -1,250 700 280 200 395 315 750 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? It is the crossover rate crossover rate D, after this point when mutually exclusive projects are considered there is no conflict in project acceptance between the NPV and 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 (5) 600 INPV (5) 6001 5003 400 300+ 2007 1001 5001 400 3007 2007 100+ 5 10 15 20 25 30 5 10 20 25 30 -100 -200 Cost of Capital (%) -1001 -2007 Cost of Capital -3001 -300 -400+ -4001 NPV Profiles C NPV Profiles D NPV Profiles C NPV Profiles D #NPV (5) INPV (5) 600 600 500 500 400 400 300 300 200 200 100 100 5 10 20 25 30 5 10 20 25 30 -100 -100 -200 Cost of Capital (%) -200 Cost of Capital% -300 -400 -300 -400
