Question: Please answer both questions and label them. ty Attempts 1 Average 1/3 1. Net present value (NPV) Evaluating cash flows with the NPV method The
Please answer both questions and label them. ty


Attempts 1 Average 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 preferred criteria that generally lead to good investment decisions. 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 $2,750,000. The project expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 $375,000 $400,000 $400,000 Year 3 Year 4 $500,000 Green Caterpillar Garden Supplies Inc.'s weighted average cost of capital is 9%, and project Beta has the same risk as the firm's average project. Based on the cash flows, what is project Beta's NPV? O-$906,205 O $1,343,795 0-$1,031,205 0-$1,406,205 Making the accept or reject decision Green Caterpillar Garden Supplies Inc.'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 agree with your coworker's statement? O 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. O 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's cash inflows. 8. Conclusions about capital budgeting The decision process Before making capital budgeting decisions, finance professionals often generate, review, analyze, select, and implement long-term investment proposals that meet firm-specific criteria and are consistent with the firm's strategic goals. Companies often use several methods to evaluate the project's cash flows and each of them has its benefits and disadvantages. Based on your understanding of the capital budgeting evaluation methods, which of the following conclusions about capital budgeting are valid? Check all that apply. The discounted payback period improves on the regular payback period by accounting for the time value of money. Because the MIRR and NPV use the same reinvestment rate assumption, they always lead to the same accept/reject decision for mutually exclusive projects. For most firms, the reinvestment rate assumption in the MIRR is more realistic than the assumption in the IRR. is the single best method to use when making capital budgeting decisions
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