Question

2. 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 11%.

	0	1	2	3	4
Project A	-950	650	385	260	310
Project B	-950	250	320	410	760

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

1.7800 = years

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

?? = years

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

2.9300 = years

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

?? = years

Answer 1

part a) b) c) and d)

Formulaes are given through excel and solution

also manual formulaes will be

For present values: Cash flows/ ( 1+rate)^year

For finding the payback or discounted payback period =

year ( after which cash flow become positive) + (-Cumulative cash flow of that year)/Cash flow of next year

All parts are solved in this

thanks

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