1. Net present value (NPy) Evaluating cash flows with the NPY method The net present value (NPV) rule is considered one of the most common and preferred criteria that generally lead to good investment decisions. Contider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgetang project (project Beta) that will require an initial investment of $3,225,000. The project is expected to generate the following net cash flows: Kappy Dog Sosp Company's weighted average cost of capital is g\%, and project Beta has the same nisk an the firm's averape proyect. Bssed on the cash fows, what is project Geta's NPV? Happy Dog Soap Company's weighted average cost of capital is 8\%, and project Beta has the same risk as the firm's average project. Based on the cash fows, what is project Beta's NPV? $1,818,54952,091,331$5,043,549$1,343,549 Making the accept or reject decision Happy Dog Sosp Company's dedsion 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 Id you to analyze two mutually ecclusive projects-project A and project a. Both projects require the same investment amouint, and the: h infiows of Project A is larger than the sum of cash inflows of project B. A coworker told your that you don't need to do an Npy analysis of tir because you already know that project A will have a larger NPV than project B. Do you agree with your coworker's statement? Yes, project A wall always have the largest. NPV, because its cash infiows are greater than project Bis cosh infiows. No, the Npy calculation is based on percentage returns, so the size of a project's cash fows does not affoct a project's NpV. No, the NPV caloulabion wil take into account not only the projects' cash inflows but also the timing of cash inflows and outfiows. Coosequently, project a could have a Larger NPy than project A. even though project A has larger cash intlows