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 8%.

0 | 1 | 2 | 3 | 4 | ||||||

Project A | -980 | 620 | 310 | 280 | 330 | |||||

Project B | -980 | 220 | 245 | 430 | 780 |

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

$ .................

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

$...............

Answer #1

Calculation of NPV

NPV of Project A = Present value of all cash inflows - Initial cash outlay

=[ 620*PVIF,8%,1 + 310*PVIF,8%,2 + 280*PVIF,8%,3 + 330*PVIF,8%,4 ] - 980

=[ 620*.925926 + 310*.857339 + 280*.793832 + 330*.735029 ] - 980

=574.07412+265.77509+222.27296+242.55957 - 980

=324.68

NPV of Project B = Present value of all cash inflows - Initial cash outlay

=[ 220*PVIF,8%,1 + 245*PVIF,8%,2 + 430*PVIF,8%,3 + 780*PVIF,8%,4 ] - 980

=[ 220*.925926 + 245*.857339 + 430*.793832 + 780*.735029 ] - 980

=203.70372+210.048055+341.34776+573.32262 -980

=348.42

**NOTE**

**The formula for calculating the Present Value Inflow
Factor (PVIF) is [1 / (1 + r)n], where “r” is Discount rate and “n”
is the useful life of investment**

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 8%.
0
1
2
3
4
Project A...

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 10%.
0
1
2
3
4
Project A...

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 7%.
0
1
2
3
4
Project A...

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 7%.
0
1
2
3
4
Project A...

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 10%. 0 1 2 3 4
Project A...

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 10%.
Project A -1,040 670 300 230 280...

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%.
0
1
2
3
4
Project A
-1,160
640...

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 7%. 0 1 2 3 4
Project A...

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 8%.
0
1
2
3
4
Project A...

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 7%. What
is Project A's NPV? Round your answer to...

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