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 9%.

	0		1		2		3		4
Project A	-970		670		375		270		320
Project B	-970		270		310		420		770

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.

$  

If the projects were independent, which project(s) would be accepted?

-Select-Neither projectProject AProject BBoth projects A and BCorrect 1 of Item 3 would be accepted.

If the projects were mutually exclusive, which project(s) would be accepted?

-Select-Neither projectProject AProject BBoth projects A and BCorrect 2 of Item 3 would be accepted.

Answer 1

Please refer to the attached image:

year projecte _ Project B DE o che si cows ra (970) 670 (970) 270 310 0.92 EWNO 0-84 375 270 (970) 616.40 315 207.90 227.20 396-50 (970) 248.40 260.40 32.3.40 546.70 408.90 420 0.77 071 320 770 NPV of Project A = $ 396.50 NPV of Project B. $ 408.90 15 the projects are independent, since the NPV of both the projects is +ve je zo both Projecte A and B would be accepted. If the project were mutually exclusive project with the highest NP v would be selected. Hence project t would be accepted. 1/1