Question

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 7%.

	0		1		2		3		4
Project A	-1,000		600		355		210		260
Project B	-1,000		200		290		360		710

What is Project A's payback? Round your answer to four decimal places. Do not round your intermediate calculations.

What is Project A's discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations.

What is Project B's payback? Round your answer to four decimal places. Do not round your intermediate calculations.

What is Project B's discounted payback? Round your answer to four decimal places. Do not round your intermediate calculations.

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

FIRST IMAGE : BOTH PAYBACK PERIODS

SECOND IMAGE : BOTH DISCOUNTED PAYBACK PERIODS

PROJECT A : PAYBACK PERIOD = 2.2143 YEARS, DISCOUNTED PAYBACK PERIOD = 2.7536 YEARS

PROJECT B : PAYBACK PERIOD = 3.2113 YEARS, DISCOUNTED PAYBACK PERIOD = 3.4909 YEARS