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 7%. 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	-1,170		630		355		210		260
Project B	-1,170		230		290		360		710

Answer 1

		PROJECT - A		PROJECT - B
Year	DF	CF	PV	CF	PV
0	1	-1170	-1170	-1170	-1170
1	0.934579	630	588.785	230	214.9533
2	0.873439	355	310.0707	290	253.2972
3	0.816298	210	171.4226	360	293.8672
4	0.762895	260	198.3528	710	541.6556
		NPV	98.6311		133.7733

Both the projects have equal life ....... and equal Investment ......... So best project can be sellected on the basis of NPV...............  

Hence ............. project ....... B .... is a better alternative.