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 8%.

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

0 1 2 3 4 Project A -1,160 630 320 190 240 Project B -1,160 230 255 340 690

Explanation / Answer

SOLUTION :

Project A Year DF@10% CASH FLOW PV a b c d=b*c 0 1 -                  1,160 -                  1,160 1 0.925925926                        630                        583 2 0.85733882                        320                        274 3 0.793832241                        190                        151 4 0.735029853                        240                        176 NPV                           25

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