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 decisions, Consider this case: Suppose Green Caterpillar Garden Supplles Inc. Is evaluating a proposed capital budgeting project (project Beta) that will require an Initial investment of $2,225,000. The project is expected to generate the following net cash flows: Green Caterpiliar Garden Supplies Inci's weighted average cost of capital is 10%, and project Beta has the same risk as the firm's average project. Based on the cash flows, what is project Beta's NPV? 3978,313 $1,125,060 $528,313 33,203,313 Green Caterpiliar 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 asl analyze two mutually exclusive projects project A and project B. Both projects require the same investment amount, and the sum of ci I of Project A is larger than the sum of cash inflows of project B. A coworker told you that ypu den't need to do an NPV analysis of the projec: you already know that project A will have a lerger NPV than project B. Do you agree with your cowarker's statement? No, the NPV calculation will take into account not only the projects' cash inflows but also the timing of cash inflows and outfiaws. Consequently, project B could have a larger NDV than project A, even though project A has larger cash infiows. No, the NPV calculation is based on percentage retums, so the size of a project's cash flows does not affect a projectis NpV. Yes, project A will always have the largest NPV, because its cash inflows are greater than progect Bz cash infiows