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

Another question on Business

Business, 22.06.2019 08:40

During january 2018, the following transactions occur: january 1 purchase equipment for $20,600. the company estimates a residual value of $2,600 and a five-year service life. january 4 pay cash on accounts payable, $10,600. january 8 purchase additional inventory on account, $93,900. january 15 receive cash on accounts receivable, $23,100 january 19 pay cash for salaries, $30,900. january 28 pay cash for january utilities, $17,600. january 30 firework sales for january total $231,000. all of these sales are on account. the cost of the units sold is $120,500. the following information is available on january 31, 2018. depreciation on the equipment for the month of january is calculated using the straight-line method. the company estimates future uncollectible accounts. at the end of january, considering the total ending balance of the accounts receivable account as shown on the general ledger tab, $4,100 is now past due (older than 90 days), while the remainder of the balance is current (less than 90 days old). the company estimates that 50% of the past due balance will be uncollectible and only 3% of the current balance will become uncollectible. record the estimated bad debt expense. accrued interest revenue on notes receivable for january. unpaid salaries at the end of january are $33,700. accrued income taxes at the end of january are $10,100

Answers: 2

Answer

Business, 22.06.2019 09:30

Factors like the unemployment rate, the stock market, global trade, economic policy, and the economic situation of other countries have no influence on the financial status of individuals. question 1 options: true false

Answers: 1

Answer

Business, 22.06.2019 16:40

Job 456 was recently completed. the following data have been recorded on its job cost sheet: direct materials $ 2,418 direct labor-hours 74 labor-hours direct labor wage rate $ 13 per labor-hour machine-hours 137 machine-hours the corporation applies manufacturing overhead on the basis of machine-hours. the predetermined overhead rate is $14 per machine-hour. the total cost that would be recorded on the job cost sheet for job 456 would be: multiple choice $3,380 $5,298 $6,138 $2,622

Answers: 1

Answer

Business, 22.06.2019 18:30

> > objectives define federalism and explain why the framers adopted a federal system instead of a unitary system. categorize powers delegated to and denied to the national government, and powers reserved for and denied to the states, and the difference between exclusive and concurrent powers.

Answers: 1

Answer

You know the right answer?

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

Questions