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 -1,000 600 440 210 260 Project B -1,000 200 375 360 710 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
Cost of Debt, Cost of Preferred Stock
This article deals with the estimation of the value of capital and its components. we'll find out how to estimate the value of debt, the value of preferred shares , and therefore the cost of common shares . we will also determine the way to compute the load of every cost of the capital component then they're going to estimate the general cost of capital. The cost of capital refers to the return rate that an organization gives to its investors. If an organization doesn’t provide enough return, economic process will decrease the costs of their stock and bonds to revive the balance. A firm’s long-run and short-run financial decisions are linked to every other by the assistance of the firm’s cost of capital.
Cost of Common Stock
Common stock is a type of security/instrument issued to Equity shareholders of the Company. These are commonly known as equity shares in India. It is also called ‘Common equity
Answer the given question with a proper explanation and step-by-step solution.
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 | -1,000 | 600 | 440 | 210 | 260 | |||||
| Project B | -1,000 | 200 | 375 | 360 | 710 |
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
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
