Suppose Black Sheep Broadcasting Compary is evaluating a proposed capital budgetino project (peoject Beta) that will require an initial investunent of $2,750,000. The project is expected to oenerate the following net cash flows: Black Sheep Broadcasting Company's weighted average cost of capital is B\%, and project Beta has the same risk as the firm's average project. Based on the cash flows, what is project Beta's NPV? $1,381,321 $1,368,679 $1,642,415 $993,679 Making the accept or reject decision Black Sheep Broadcasting 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. 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 inflows 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 B. Do you apree with your coworker's statement? Yes, project A will always have the largest NPV, because its cash inflows are greater than project B's cash inflows. 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. 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. The internal rate of refurn (IRR) refers to the compound annual rate of return that a project generates based on its up-front cost and subsequent cash flows, Consider this case: Blue Larna Mining Company is evaluating a proposed capital budgeting project (project Delta) that will require an initial investunent of $1,450,000. Blue Lama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because percentages and returns are easier to understand and to compare to required returns. Blue Llama Mining Compary's WACC is 9%, and project Delta has the same risk as the firm's average project. The project is expected to generate the following net cash flows: Which of the following is the correct calculation of project Delta's IRR? 3.40% 5.65% 5.14% 4.6395 If this is an independent project, the IRR method states that the firm should If the project's cost of capital were to increase, how would that affect the IRR? The IRR would increase. The IRR woutd decrease. The IRR would not change