respond t$0$: Capital budgeting decisions are typically made using various financial metrics with net present value $($NPV$)$ being one of the most widely used. NPV is the difference between present value of cash inflows and outflows with a project. There are some cases where budgets are made solely based off NPV data for instance, if a company is considering multiple independent projects but is limited on the amount of resources that they can use they may just use NPV data as validation. Projects with higher NPV values are preferred because they are projected to generate more value for the company. Also, when a company has limited budget for capital investments, they tend to prioritize projects with the highest NP to ensure that the company allocated its their limited resources appropriately to generate the greatest return between project. There are also reasons that might drive a higher NPV value such has high cash invlows, as the more money involved over the projects lifetime will have higher NPV$.$ Projects that also generate cash flows sooner will have higher NPV due the the time value of money. There are other factors such as strong market demand and discount rates that can result in higher NPVs $($Miller $2022).$ An example of this is two separate projects $($A and B$)$ they each Would need an initial investment of $$100,000$ and A has cash flows of $$50,000$ a year for $5$ years while B has a cash flow of $$40,000$ for $5$ years there is a $10\%$ discount rate applied. For project A we will use this formula: $50,000/(1+\mathrm{.}10)^$t $+50,000....($repeat$)-100,000.$ You would repeat this calculation $5$ times and change the t accordingly for each year up to $5$ years. You will have the same calculation for project B but replace $50,000$ with $40,000.$ Using these numbers B has the higher NPV value. With a number of $$21,131$ compared to project A having $$7,423.$