Bellinger Industries is considering two projects. have for inclusion in its capitul budget, and you 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 capitul requirements, and tex effects are all included in these cush flows. Both projects 4- veces lives and the have rsl characteristics.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Bellinger Industries is considering two projects
for inclusion in its capital budget, and you have
been asked to do the analysis. Buth projects
after- tux 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 rush flows. Both projects 4-
year lives, and they have nisk characteristics
Similar to the firm's average project. Bellinger's
WALL is 8%.
0
4
670
270
What is Project A's NPV?
$
-1,080
- 1,080
2
3
t
335 290
440 440
What is Project B's NPU?
16:
2's
+
4
340 Project A
790 Project B
Transcribed Image Text:$ Bellinger Industries is considering two projects for inclusion in its capital budget, and you have been asked to do the analysis. Buth projects after- tux 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 rush flows. Both projects 4- year lives, and they have nisk characteristics Similar to the firm's average project. Bellinger's WALL is 8%. 0 4 670 270 What is Project A's NPV? $ -1,080 - 1,080 2 3 t 335 290 440 440 What is Project B's NPU? 16: 2's + 4 340 Project A 790 Project B
Expert Solution
Step 1: Introduction of net present value

Net present value refers to the difference between the present value of cash inflows and cash outflows during the life of the project which is the method of capital budgeting useful for the investors in decision-making.


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