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%.
0 1 2 3 4
Project A -910 650 325 190 240
Project B -910 250 260 340 690
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.

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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.