Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The net present value (NPV) method estimates how much a potentiat project will contribute to and it is the best selection criterion. The the NPV,

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
The net present value (NPV) method estimates how much a potentiat project will contribute to and it is the best selection criterion. The the NPV, the more value the proiect ados; and added walie mesnes stock price. in equation Form, the NPy is defined as: NPV=CF0+(1+r)7CP1+(1+r)7Cp1++(1+r)nCPn=1=0N(1+s)1CF1 assumes that cash inhows can be reinvested at the project's risk-adjusted When the firm is considering independent projects, if the project't NPV exceeds zero the firm should the project. When the Firm is considering mutually exclusive projects, the Firm shauld accept the project with the NPV. Quantitative Problems Bellinger fndustries is considering two projects for inclusion in its captar budget, and vou have been asked to do the analyas. Both projects' after-tar cash. flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are al induded in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Alellinger's wacC is a\%. What is Froject A's NiVI Do not round intermediate calculstions. Round vour anseer to the nearest cent. s What is Project ar NPV? Do not round intermediste calculations. Aound your antwer to the nearest cent. 8 If the projects wore indeperders, which project(s) would be accepted? If the projects were mutually exclust. CFt is the expected cash fow at Time t,r is the project's nsk-adjusted cost of capital, and N is its life, and cash cutfions are treated as negative cash flows. The NPV colculation assumes that cash inflows can be reinvevted at the project's riskadjutted When the firm is considering independent projects, if the project's NPV exceeds tero the firm should the project. When the firm is considering mutushy ricturtive profects, the firm should accept the project with the NPN. Quantitative Problemi Bellinger Ineustries is considering twa projects for inclusion in iss capital budget, and you have been asked to do the analyis: Both projects' atter-tax cash hows ace shown on the time line below. Depreciation, savope values, bet operating working capital requirements, and tax effects are all included in these cash fioms, Both projects have 4-year ives, and they have risk characteristic timilar to the firm's average profect. Bellinger's wACC is a\%. What is Freject A's NFV Do not round intermediate calculations, Round your answec to the nearest cant. s What is Project a's NWT Do not round intermedate calculations. Round your answer to the nearest cent 4 If the projects were independent, which project(s) would be accepted? If the projects were mutualv exclusive, which project(o) would be accepted? The net present value (NPV) method estimates now much a potential profect will contribute to , and it is the best sesection criterion. The the NPV, the more walue the project adds; and added value means a stock price. In equation form, the NPV is defined as: should the project. When the firm is considering mutualiy exclusive projects, the firm should sccept the profect with the NPV. have 4-year tves, and ther have risk characteristics similar to the firm's average project. Aellinger's Wace is 8%. What is Project A's NPV? Do not round intermediate calculations. Round your answer to the nearest cant. \% What is Project B's NPV? Do not round intermedate calculatioes. Round your answer to the nearest cent. 5 It the projects were independent, which project(s) would be accepted? itually exdusive, which project(s) would be secepted? NPV=CF0+(1+1)1CF2+(1+1)nCh2++(1+2)nCV2t=0(1+r)1Crt CFf is the expected cash flow at Time t, r is the project's risk-adjusted cost of capital, and N is its life, and cash outfiows are treated as negative cash flaws. The N PV calculation assumes that cash inflows can be feinvested at the project's risk-adjusted When the firm is considering independent projects, if the project's NPv exceeds zero the firm should the project. When the firm is considering mutually exclusive projects, the firm should accept the project with the NPy. Quantitative Problem: Bellinger industries is considering two profects for inclusion in its capitai budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciatoo, ssivage values, net operating working capital requirements, and tax effects are alf induded in thesen cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is B\%. What is Project A's NPV? Do not round intermediate calculations: Mound your answer to the nearest cent: s What is Project D's NPM? Do not round intermedate calculations. Round your answer to the neareat cent. s If the projects were independent, which project(o) would be accepted? If the projects were mutualfy exdutive, which project(s) would be occepted? The net present value (NPV) method estimates how much a potentiat project will contribute to and it is the best selection criterion. The the NPV, the more value the proiect ados; and added walie mesnes stock price. in equation Form, the NPy is defined as: NPV=CF0+(1+r)7CP1+(1+r)7Cp1++(1+r)nCPn=1=0N(1+s)1CF1 assumes that cash inhows can be reinvested at the project's risk-adjusted When the firm is considering independent projects, if the project't NPV exceeds zero the firm should the project. When the Firm is considering mutually exclusive projects, the Firm shauld accept the project with the NPV. Quantitative Problems Bellinger fndustries is considering two projects for inclusion in its captar budget, and vou have been asked to do the analyas. Both projects' after-tar cash. flows are shown on the time line below. Depreciation, salvage values, net operating working capital requirements, and tax effects are al induded in these cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Alellinger's wacC is a\%. What is Froject A's NiVI Do not round intermediate calculstions. Round vour anseer to the nearest cent. s What is Project ar NPV? Do not round intermediste calculations. Aound your antwer to the nearest cent. 8 If the projects wore indeperders, which project(s) would be accepted? If the projects were mutually exclust. CFt is the expected cash fow at Time t,r is the project's nsk-adjusted cost of capital, and N is its life, and cash cutfions are treated as negative cash flows. The NPV colculation assumes that cash inflows can be reinvevted at the project's riskadjutted When the firm is considering independent projects, if the project's NPV exceeds tero the firm should the project. When the firm is considering mutushy ricturtive profects, the firm should accept the project with the NPN. Quantitative Problemi Bellinger Ineustries is considering twa projects for inclusion in iss capital budget, and you have been asked to do the analyis: Both projects' atter-tax cash hows ace shown on the time line below. Depreciation, savope values, bet operating working capital requirements, and tax effects are all included in these cash fioms, Both projects have 4-year ives, and they have risk characteristic timilar to the firm's average profect. Bellinger's wACC is a\%. What is Freject A's NFV Do not round intermediate calculations, Round your answec to the nearest cant. s What is Project a's NWT Do not round intermedate calculations. Round your answer to the nearest cent 4 If the projects were independent, which project(s) would be accepted? If the projects were mutualv exclusive, which project(o) would be accepted? The net present value (NPV) method estimates now much a potential profect will contribute to , and it is the best sesection criterion. The the NPV, the more walue the project adds; and added value means a stock price. In equation form, the NPV is defined as: should the project. When the firm is considering mutualiy exclusive projects, the firm should sccept the profect with the NPV. have 4-year tves, and ther have risk characteristics similar to the firm's average project. Aellinger's Wace is 8%. What is Project A's NPV? Do not round intermediate calculations. Round your answer to the nearest cant. \% What is Project B's NPV? Do not round intermedate calculatioes. Round your answer to the nearest cent. 5 It the projects were independent, which project(s) would be accepted? itually exdusive, which project(s) would be secepted? NPV=CF0+(1+1)1CF2+(1+1)nCh2++(1+2)nCV2t=0(1+r)1Crt CFf is the expected cash flow at Time t, r is the project's risk-adjusted cost of capital, and N is its life, and cash outfiows are treated as negative cash flaws. The N PV calculation assumes that cash inflows can be feinvested at the project's risk-adjusted When the firm is considering independent projects, if the project's NPv exceeds zero the firm should the project. When the firm is considering mutually exclusive projects, the firm should accept the project with the NPy. Quantitative Problem: Bellinger industries is considering two profects for inclusion in its capitai budget, and you have been asked to do the analysis. Both projects' after-tax cash flows are shown on the time line below. Depreciatoo, ssivage values, net operating working capital requirements, and tax effects are alf induded in thesen cash flows. Both projects have 4-year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is B\%. What is Project A's NPV? Do not round intermediate calculations: Mound your answer to the nearest cent: s What is Project D's NPM? Do not round intermedate calculations. Round your answer to the neareat cent. s If the projects were independent, which project(o) would be accepted? If the projects were mutualfy exdutive, which project(s) would be occepted

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Contemporary Financial Management

Authors: R. Charles Moyer, William J. Kretlow, James R. Mcguigan

8th Edition

0324065914, 9780324065916

More Books

Students also viewed these Finance questions

Question

Detail the sections of a functional cash flow statement?

Answered: 1 week ago