Evaluating cash flows with the NPV method The net present Value (NPV) mine is considered one of the most common and preferred crkrle that generally lead to good investment deciso Consider this case: Suppose Blue Hamster Manufacturing Inc. Is evaluating a proposed capital budgeting project (project Beta) that will require an leitud investment at $2,500,000. The project is expected to generate the following net cash flows: Year Year 1 Cash Flow $325,000 400,000 425,000 Year 2 Year 3 Year 4 400,000 Blue Bamster Manufacturing Incs weighted average cost of capital is 10%, and project Beta has the same risks them average project. Based on the cash flows, what is project Beta's NPV? (Note: Do not round your Intermediate calculation) 51.473,674 $1,218,542 51,281,453 53,781,453 Making the accept or reject decision Making the accept or reject decision Blue Hamster Manufacturing 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 bos reject pd you to analyze two mutually exclusive projects-project A and project B. Both projects require the same investment amount, and the accept in inflows of Project A is targer than the sum of cast inflows of project B. A coworker told you that you don't need to do an NPV analysis of the projeed because you already know that project will have a larger NPV than project. 8. Do you agree with your coworker's statement? O No, the NPV calculation will take into account not only the projects' cash inflows but also the timing of cash inflows and outflows. Consequently, project B could have a larger NPV than project A, even though project A has larger cash inflows. O No, the NPV calculation is based on percentage returns, so the size of a project's cash flows does not affect a project's NPV. Yes, project A will always have the largest NPV, because is cash inflows are greater than project B's cash inflows