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%.

	0		1		2		3		4
Project A	-1,140		640		305		230		280
Project B	-1,140		240		240		380		730

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

$

$

Answer 1

Statement showing Cash flows			Project A		Project B
Particulars	Time	PVf 10%	Amount	PV
Cash Outflows	-	1.00	(1,140.00)	(1,140.00)	(1,140.00)	(1,140.00)
PV of Cash outflows = PVCO				(1,140.00)		(1,140.00)
Cash inflows	1.00	0.9091	640.00	581.82	240.00	218.18
Cash inflows	2.00	0.8264	305.00	252.07	240.00	198.35
Cash inflows	3.00	0.7513	230.00	172.80	380.00	285.50
Cash inflows	4.00	0.6830	280.00	191.24	730.00	498.60
PV of Cash Inflows =PVCI				1,197.93		1,200.63
NPV= PVCI - PVCO				57.9		60.6