11- Assignment - The Basics of Capital Budgeting 1. Ner present vaiue (Nrv) 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 Alpha) that will require an Initial investment of $500,000. The project is expected to generate the following net cash flows: Green Caterplilar Garden Supplies Incis weighted average cost of capital is 8%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Apha's net present value (NPV)? $1,362,918$437,918$937,918$1,125,502 Green Caterpillar Garden Supplies Incis 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 statements best explains what it means when a project has an NPV of 50 ? When a project has an NPV of 50 , the project is earning a rate of return equal to the project's weighted average cost of capitai. It's OK to accept a project with an NPV of $0, because the project is eaming the required minimum rate of return. When a project has an NPV of $0, the project is earning a rate of return less than the project's welghted average cost of capital. It's OK to accept the project, as long as the project's profit is positive. 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