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' aftertax 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 4year lives, and they have risk characteristics similar to the firm's average project. Bellinger's WACC is 7%.
0  1  2  3  4  









Project A  1,130  680  335  240  290  
Project B  1,130  280  270  390 
740 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. 
NPV = Total Present value of Cash inflows  Initial investment
In case of unequal cash flows, their present value is computed as 
Present value of a cash flow = Cash flow x PVIF (rate, year)
where, PVIF = Present value interest factor of $1 = 1 / (1 + r)^{n}r being the cost of capital or discount rate and n being the year for which it is calculated
for example PVIF @ 10% for year 1 = 1 / (1 + 0.1)^{1} = 0.90909090909
Project A
Year  Cash Flows  PVIF @7%  Present value 
0  ()1130  1  ()1130 
1  680  0.93457943925  635.51 
2  335  0.87343872827  292.60 
3  240  0.81629787688  195.92 
4  290  0.76289521203  221.24 
NPV  215.27 
Project B
Year  Cash Flows  PVIF @7%  Present value 
0  ()1130  1  ()1130 
1  280  0.93457943925  261.68 
2  240  0.87343872827  209.63 
3  390  0.81629787688  318.36 
4  740  0.76289521203  564.54 
NPV  224.21 
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