The not present value (NV) cules 26.106 ond or the most common and preferred criteria that generally lead to good investment decision Consider this case 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 Cash Flow $350,000 Year 1 Year 2 Year $400,000 $425,000 $475,000 Year 4 Green Caterpillar Garden Supplies Inc.'s weighted average cost of capital is, and project Beta has the same risk as the firm's average project Based on the cash flows, what is project Beta NPV? -$427,547 -$3,127.547 $1,322,453 -5902,547 Making the accept or reject decision Green Caterpillar Garden Supplies Inc. decision to accept or reject project detais independent of its decisions on other projects. If the firm follows the NPV method, it should project Beta Suppose your bous has asked you to analyze two mutually exclusive projects-project A and project 8. Both projects require the same investment amount, and the sum of cash flows of Project A is larger than the sum of cash flows of project 3. A coworker told you that you don't need to do an NPV analysis of the projects because you already know that project will have a larger NPV than project 8. Do you agree with your coworkers statement No, the NPV calculation is based on percentage returns to the size of a project's cash now does not affect a project's NV Yes, broject A will always have the targest NPV, because its cash inflows are greater than project % cash intows. O No, the NIV calculation will take into account not only the projects' cash inflows but also the timing of cash inflows and outflows Consequently, project 8 could have a larger NPV than project A, even though project A has larger cash innown Save & Continue Continue without saving