Pheasant Pharmaceuticals's decision to accept or reject project Alpha is independent of its decisions on$*$other projects. If the firm follows the NPV

method, it should

project Alpha.

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 agree with your coworker's

statement?

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$.$

Yes, project A will always have the largest NPV$,$ because its cash inflows are greater than project B$\text{'}$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.