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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
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 ganerally lead to good investment decisions. Consider, this cese! Suppose Biack Sheep Broadcasting Cempony is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of 5450,000 . The project is expected to generate the following net cash flows: Biack Sheep Broadcasting Comparry's waighted averege cost of copital is 0W, and project Alphe has the same risk as the firm's averege project, Based on the cash flows, what is project Alphas net present value (NPV)? $1,316,256 5043,255 51,253,256 31,243,256 Making the accept or reject decision Elack Sheep Erosdcasting Componvs decision to sceept or refect project Alpha is independent of its decisions en other projects. If the firm follons the. NPV method, it should project Alpha. Making the accept or reject decision Black Sheep Broadcasting Company'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. Which of the following s best explains whet it means when a project has an NPV of $0 ? When a proj NPV of 50 , the project is earning a rate of return less than the project's weighted averege cost of capital. It's OK to bccept the project, as long as the project's profit is positive. When a project hos an NPV of 50 , the project is earning a profit of so. A firm should reject any project with an NPV of s0, becouse the project is not proftable. nccept a project whit an NPV of 10 , because the project is earning the required minimum rate of retum
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