Attempts Keep the Highest: 1/3 1. Net present value (NPV) Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and proferred criteria that generally lead to good investment decisions Consider this caset Suppose tumbering Ox Truckomakers is evaluating a proposed capital budgeting project (project Beta) that will require an initial Investment of $3,225.000. The project is expected to generate the following net cash flows Year Year 1 Year 2 Cash Flow $325,000 $425.000 5475.000 Year Year 4 $475,000 Lumbering Ox Truckmaker's weighted average cost of capital is 8 and project Beta has the same nk the firm's average project, Based on the cash flows what is project Beta's NPV? $1.291.504 taking the coject decision O Type here to watch O $1,291,504 O $1,358,496 O $1,833,496 Malding the accept or reject decision Lumbering Ox Trudimakers'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 bass has asiced you to analyze two mutually exclusive projects-project A and project 3. Both projects require the same investment amount, and the sum of cash inflows of Project Als larger than the sum of cash inflows of project 8. 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 projects. Do you agree with your coworkers statement? Yes, project. A will always have the largest NP, because is cash infows are greater than project is cash intows ON the Nations based on percentage returns, so the sze of a project's cash flows does not affect a projev ONS, the concerto account not only the projects cash nous but also the timing of as infons and trans Consequent could have a larger than project ever though project has arger cast on Gradie Now Save & Con here to search P