1. Net present value (NPV) Evaluating cash fiows with the NPV method The net present value (NPy) rule is considered one of the most common and preferred criteria that generally leod to good imvestment decisions. Censider this case: Suppose Celestial Crane Cosmetics is evalvoting a proposed capital budgeting project (project Apha) that will require an initial investment of $550,000. The project is expected to generate the following net cash flows: Celestial Crane Cosmetics's weighted average cost of capital is 9w, and proyect Alpha has the same risk as the firm's average project. Based on the cash fions, what is project Aphas net present value (NPN)? $745,586$1,170,586$1,195,586$857,424 Making the accept or reject decision Celestiat Crane Cosmetics's decision to accept or refect project Alpha is independent of igs decisions on other projects. If the firm toliowis the Npu method, it shauld project Aptra Which of the foliowing statements best explains what it means when a project has an NrN of so? When a project has an NFy of \$0, the project is earning a profit of s0. A rim should reject any project with an Npy of $0, because the peoject is not profitable. Making the accept or reject decision Celestial Crane Cosmetics's decision to accept or reject project Alpha is independent of its decisions on other projects. If the firm follows the NFV method, it should project Alpha. Which of the following statements best explains what it means when a project has an NPV of $0 ? When a project has an NPV of \$0, the project is earning a profit of $0. A firm should reject any project with an NPV of $0, because the project is not profitable. When a project has an NPV of $0, the project is earning a rate of return equal to the project's weighted average cost of capital. It's OK to accept a project with an Npy of $0, because the project is earning the required minimum rate of return. When a project has an NPV of so, the project is earning a rate of retum less than the project's weighted average cost of capitat. It's OK to accept the project, as long as the project's profit is positive