Business, 07.02.2021 22:40, pattydixon6

The Basics of Capital Budgeting: Evaluating Cash Flows: NPV The net present value (NPV) method estimates how much a potential project will contribute to , and it is the best selection criterion. The the NPV, the more value the project adds; and added value means a stock price. In equation form, the NPV is defined as:
CFt is the expected net cash flow at Time t, r is the project's risk-adjusted cost of capital, N is its life, and cash outflows are treated as negative cash flows. The NPV calculation assumes that cash inflows can be reinvested at the project's risk-adjusted . When the firm is considering independent projects, if the project's NPV exceeds zero the firm should the project. When the firm is considering mutually exclusive projects, the firm should accept the project with the NPV.

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 -1,110 600 330 250 300
Project B -1,110 200 265 400 750
What is Project A's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
$
Show All Feedback
What is Project B's NPV? Do not round intermediate calculations. Round your answer to the nearest cent.
$
Show All Feedback
If the projects were independent, which project(s) would be accepted?
would be accepted.
If the projects were mutually exclusive, which project(s) would be accepted?
would be accepted.

Answers: 2

Show answers

Other questions on the subject: Business

Business, 21.06.2019 17:10, candaceblanton

Titus manufacturing, inc. provided the following information for the year: purchases - direct materials $91,000 plant utilities and insurance 68,000 indirect materials 11,170 indirect labor 4270 direct materials used in production 99,000 direct labor 117,500 depreciation on factory plant & equipment 4000the inventory account balances as of january 1 are given below. direct materials $44,000 work-in-progress inventory 10,000 finished goods inventory 50,000what is the ending balance in the direct materials account? $135,000 $36,000 $110,170 $6000

Answers: 3

continue

Business, 22.06.2019 01:30, AWFHayami

Juwana was turned down for a car loan by a local credit union she thought her credit was good what should her first step be

Answers: 1

continue

Business, 22.06.2019 06:40, jordenv00

Self-interest achieve society’s economic goals because producers know which goods consumers want the most. as consumers and producers exercise their freedom to act in their own self-interest, markets will produce the desired goods at the lowest possible cost. consumers and producers both operate based on society’s economic goals. consumers know which goods can be produced at the lowest cost. there is a wide variety of desired goods and services in a market system because producers determine what to produce. consumers change their minds frequently. there is always a need to produce something new and improved. individual wants are diverse. what is produced is ultimately determined by consumers, because if the goods offered are not what consumers want, consumers will not buy them. producers, because they are driven by profits. producers, because they determine what to produce. consumers, because they participate in marketing surveys.

Answers: 2

continue

Business, 22.06.2019 07:40, sistersquad

Myflvs -question 3 multiple choice worth 2 points)(10.04 hc)in panama city in january, high tide was at midnight. the water level at high tide was 9 feet and1 foot at low tide. assuming the next high tide is exactly 12 hours later and that the height of thewater can be modeled by a cosine curve, find an equation for water level in january for panamacity as a function of time (t).of(t) = 4 + 5of(t) = 5 cost + 4o 460) = 5 cos 1+ 4of(0) = 4 cos + 5

Answers: 1

continue

Do you know the correct answer?

The Basics of Capital Budgeting: Evaluating Cash Flows: NPV The net present value (NPV) method esti...