Question

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 7%.

	0		1		2		3		4
Project A	-950		600		450		250		300
Project B	-950		200		385		400		750

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

_____ years

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

_____ years

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

______ years

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

_____ years

Answer 1