Quantitative Problem: Bellinger Industries is considering two projects for inclu

Question

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 9%.

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 -1,150 670 365 220 270 Project B -1,150 270 300 370 720

Explanation / Answer

Project A's NPV

=-1150+670/1.09^1+365/1.09^2+220/1.09^3+270/1.09^4

=133.05

Project B's NPV

=-1150+270/1.09^1+300/1.09^2+370/1.09^3+720/1.09^4

=145.98

the above is the answer

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