Ch 11: Assignment - The Basics of Capital Budgeting Suppose Green Caterpillar Garden Supplies Inc. is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,225,000. The project is expected to generate the following net cash flows: Year Year 1 Cash Flow $275,000 $400,000 3450,000 Year 2 Year 3 Year 4 $425,000 Green Caterpillar Garden Supplies Inc.'s weighted average cost of capital is 8%, and project Beta has the same risk as the firm's average project Based on the cash flows, what is project Beta's NPV? $1,267,177 $3,162,023 $1,149,388 $957,823 Making the accept or reject decision Green Caterpillar Garden Supplies inc's decision to accept or reject project Beta Is Independent of its decisions on other projects. If the firm follows the NPV method, it should project Beta Suppose your boss has asked you to analyze two mutually exclusive projects-project A and project B. Both projects require the same investment amount, and the sum of cash into of Project A is larger than the sum of cash inflows of project B. A coworker told you that you don't need to do an NPV analysis of the projects because you already know that project A will have a larger NPV than project 6. Do you agree with your coworker's statement Yes, project will always have the largest Np, because its cash Innows are greater than project cash flow to the calculation will take into account not only the projects cash inflows but also the timing of cash inflows and outlows Consequently, project could have a larger NPV than project A, even though project A has targer cash flows No, the calculation is based on percentage returns to these of a project's cachons does not affect projects PV arch