Question: o... O Payback period was the earliest -Select- selection criterion. The selectis a break-even calculation in the sense that it a project's cash flows come

o... O Payback period was the earliest -Select- selection criterion. The selectis a break-even calculation in the sense that it a project's cash flows come in at the expected rate, the project will break even. The equation is: Number of Urher of you Payback years prior to + Cul flow during all overy yes full recovery The Select a project's payback, the better the project is. However, payback has 3 main disadvantages: (1) All dollars received in different years are given Select weight. (2) Cash flows beyond the payback year are ignored. (3) The payback merely indicates when a project's investment will be recovered. There is no necessary relationship between a given payback and investor wealth maximization. A variant of the regular payback is the discounted payback. Unlike regular payback, the discounted payback considers - Select costs. However, the discounted payback still disregards cash flows Select the payback year. In addition, there is no specific payback rule to justify project acceptance. Both methods provide information about Select and risk 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% 1 2 3 260 Project A Project 1,050 -1,050 700 300 350 285 210 360 710 What is Project A's payback? Do not round Intermediate calculations, Round your answer to four decimal places 1.17 years What is Project A's discounted payback? Do not round intermediate calculations. Round your answer to four decimal plocos 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

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

After reading an article about activity-based costing in a trade journal for the furniture industry, Adriana Lopez wondered if it was time to critically analyze overhead costs at Success Systems. In...

Can you please answer these questions for me? The Basics of Capital Budgeting: Payback Period Payback Period Payback period was the earliest -Select- selection criterion. The -Select-vis a...

4. The Basics of Capital Budgeting: Payback Payback period was the earliest Select selection criterion. The is a "break-even calculation in the sense that if a project's cash flows come in at the...

The Basics of Capital Budgeting: Payback Period Payback Period Payback period was the earliest -Select- selection criterion. The -Select- is a "break-even" calculation in the sense that if a...

CAN YOU PLEASE answer THIS TWO QUESTION THANK YOU 2. 2: The Basics of Capital Budgeting: NPV , and it is the best selection criterion. The larger the NPV, the more value the project adds; and added...

quantitative problem only show work please Select rate of return, so to overcome some of the IRR's limitations the modified Business executives often prefer to work with IRR was devised. The MIRR...

Payback period was the earliest -Select- selection criterion. The -Select- is a "break-even" calculation in the sense that if a project's cash flows come in at the expected rate, the project will...

Payback period was the earliest Select - selection criterion. The Salect vis a "break-even calculation in the sense that if a project's cash flows come in at the expected rate the project will break...

CAN YOU PLEASE ANSWER THIS ALL BLANK both QUESTION THANK YOU 4. 6: The Basics of Capital Budgeting: Payback Payback period was the earliest -Select- selection criterion. The -Select- is a...

Payback period was the earliest -Select selection criterion. The -Select- v is a "break-even" calculation in the sense that if a project's cash flows come in at the expected rate, the project will...

Payback period was the earliest -Select- selection criterion. The -Select- is a "break-even" calculation in the sense that if a project's cash flows come in at the expected rate, the project will...

Describe in detail the objective of the Muslim League. Are you agree that Muslim League achieved its goal according to its aims?

Who are the major stakeholders of the bank that you do business with locally? What are the major claims of those stakeholders ?

A property has an effective gross income of $ 3 6 , 0 0 0 , 1 0 % vacancies and bad debts, operating expenses of $ 2 0 , 0 0 0 and a break - even ratio of 7 0 % . This implies debt service of: $ 4 ,...

A company is preparing completing their Cash Budget. The following data has been prepared for cash receipts and payments. January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash...