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Quantitative Problem: Bellinger Industries is considering two projects for inclusion in its capital budget, and you have...

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Quantitative Problem: Bellinger Industries isconsidering two projects for inclusion in its capital budget, andyou have been asked to do the analysis. Both projects' after-taxcash flows are shown on the time line below. Depreciation, salvagevalues, net operating working capital requirements, and tax effectsare all included in these cash flows. Both projects have 4-yearlives, and they have risk characteristics similar to the firm'saverage project. Bellinger's WACC is 8%.

01234
Project A-910650325190240
Project B-910250260340690

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.

Answer & Explanation Solved by verified expert
4.1 Ratings (575 Votes)

ANS PROJECT A: $ 297.72

PROJECT B: $ 321.46

Project A
Year Project Cash Flows (i) DF@ 8% DF@ 8% (ii) PV of Project ( (i) * (ii) )
0 -910 1 1                         (910.00)
1 650 1/((1+8%)^1) 0.926                           601.85
2 325 1/((1+8%)^2) 0.857                           278.64
3 190 1/((1+8%)^3) 0.794                           150.83
4 240 1/((1+8%)^4) 0.735                           176.41
NPV                           297.72
Project B
Year Project Cash Flows (i) DF@ 8% DF@ 8% (ii) PV of Project ( (i) * (ii) )
0 -910 1 1                         (910.00)
1 250 1/((1+8%)^1) 0.926                           231.48
2 260 1/((1+8%)^2) 0.857                           222.91
3 340 1/((1+8%)^3) 0.794                           269.90
4 690 1/((1+8%)^4) 0.735                           507.17
NPV                           321.46

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Quantitative Problem: Bellinger Industries isconsidering two projects for inclusion in its capital budget, andyou have been asked to do the analysis. Both projects' after-taxcash flows are shown on the time line below. Depreciation, salvagevalues, net operating working capital requirements, and tax effectsare all included in these cash flows. Both projects have 4-yearlives, and they have risk characteristics similar to the firm'saverage project. Bellinger's WACC is 8%.01234Project A-910650325190240Project B-910250260340690What 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.

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