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1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Cute Camel Woodcraft Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,500,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $300,000 $475,000 $425,000 $400,000 Making the accept or reject decision Cute Camel Woodcraft Company'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. 0 -$3,652,658 Making the acce accept act decision reject Cute Camel Wood method, it should pany's decision to accept or reject project Beta is indep project Beta. 1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Consider this case: Suppose Cute Camel Woodcraft Company is evaluating a proposed capital budgeting project (project Beta) that will require an initial investment of $2,500,000. The project is expected to generate the following net cash flows: Year Year 1 Year 2 Year 3 Year 4 Cash Flow $300,000 $475,000 $425,000 $400,000 Making the accept or reject decision Cute Camel Woodcraft Company'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. 0 -$3,652,658 Making the acce accept act decision reject Cute Camel Wood method, it should pany's decision to accept or reject project Beta is indep project Beta