valuating 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 dedisions. Consider this case: Suppose Lumbering Ox Truckmakers is evaluating a proposed capital budoeting project (project Beta) that will require an initial investment of $3,225,000. The project is expected to generate the following net cash flows: Lumbering Ox Truckmakers's weighted average cost of capital is 7%, and project Beta has the same risk as the firm's average project. Based on the cash flows, what is project Beta's NPV? $1,345,341$1,495,341$1,820,34151,395,341 Making the accept or reject decision Lumbering Ox Truckmakers's decision to acceot or relect project Beta is independent of its decisions on other projects. If the firm followil the Nor method, it should project beta. Suppose youir bos Id you to analyze two mutually exdiulve prolects-project A and oroject 8 . Both projects require the same impestment amount, and the : th inflows of Project A is larger than the sum of cash inflows of project B. A coworker told you that you don A need to do an NPY aftalysis of it because you alteady know that project A wiil have a larger NPV than project B. Do you agree with your coworker's statement? Lumbering Ox Truckmakers's decision to accept or reject project Beta is independent of its decisions on other projects, If the firm follows the Npy 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 canh 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? Yes, project A will always have the largest NPV, because its cash inflows are greater than project B's cash inflows. No, the NPV caloulabon will take into account not only the projects' cash inflows but also the timing of cash inflows and outflows. Consequently, project B cold have a larger NPV than project A, even though project. A. has larger cash inflows, 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