Bellinger Industries is considering two projects for inclusion in its capital bu

Question

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 10%.

What is Project A's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

$  

What is Project B's NPV? Round your answer to the nearest cent. Do not round your intermediate calculations.

$  

0 1 2 3 4 Project A -950 690 365 210 260 Project B -950 290 300 360 710

Explanation / Answer

NPV = PV of Inflow - PV of Outflow

NPV OF Project A = 1,264.28 - 950 = $314.28

NPV OF Project B = 1,267 - 950 = $317

Year DF(10%) Project A PV Project B PV 0 -950 -950 1 0.90909 690 627.2721 290 263.64 2 0.82644 365 301.6506 300 247.932 3 0.75131 210 157.7751 360 270.4716 4 0.68301 260 177.583497 710 484.9371 Total 1,264.28 1,267

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