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: -1,080 630 330 260 310 Project B: -1,080 230 265 410 760

Explanation / Answer

Year Project A Discount@10% PVCF Project B PVCF

1 630 0.909 572.67 230 209.07

2 330 0.826 272.58 265 218.89

3 260 0.751 195.26 410 307.91

4 310 0.683 211.73 760 519.08

PV cash flows 1252.24 1254.95

Initial investment (1080) (1080)

NPV 172.24 174.95

172% 175%.

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