Reference no: EM131896901
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 11%.
0 1 2 3 4
Project A -1,250 730 360 270 315
Project B -1,250 330 295 420 765
What is Project A’s IRR? Do not round intermediate calculations. Round your answer to two decimal places. %
What is Project B's IRR? Do not round intermediate calculations. Round your answer to two decimal places. %
If the projects were independent, which project(s) would be accepted according to the IRR method?
If the projects were mutually exclusive, which project(s) would be accepted according to the IRR method?
Could there be a conflict with project acceptance between the NPV and IRR approaches when projects are mutually exclusive?
The reason is Reinvestment at the is the superior assumption, so when mutually exclusive projects are evaluated the approach should be used for the capital budgeting decision.
|
Debating whether to convert its all-equity capital structure
: Fletcher Corporation is debating whether to convert its all-equity capital structure to one that is 40% debt.
|
|
Capital budget-what is project discounted payback
: Bellinger Industries is considering two projects for inclusion in its capital budget, What is Project A's discounted payback?
|
|
What is the firm WACC after borrowing
: What is the firm’s WACC after borrowing $45,000 and using the proceeds to repurchase shares (i.e., after recapitalization)?
|
|
Which project would be accepted according to MIRR method
: If the projects were mutually exclusive, which project(s) would be accepted according to the MIRR method?
|
|
Project acceptance between the NPV and IRR approaches
: Could there be a conflict with project acceptance between the NPV and IRR approaches when projects are mutually exclusive?
|
|
When does salvage occur and what is effect on cash flow
: What are the changes in Net Working Capital and when will they occur? Is there any salvaging here? When does salvage occur and what is the effect on cash flow?
|
|
Cumulative gap of the bank for interest-sensitive assets
: What is the cumulative gap of the bank for interest-sensitive assets and interest-sensitive liabilities of maturity buckets up to 180 days as on March 31, 2015?
|
|
Rapidly growing producer of circuit boards used
: Aviant Corporation, based in the USA is a rapidly growing producer of circuit boards used in the electronic industry. What is WACC (after tax) of the company?
|
|
What is the projects MIRR
: A project has an initial cost of $35,725, expected net cash inflows of $15,000 per year for 7 years, and a cost of capital of 13%. What is the project's MIRR?
|