2. Net present value (NPV) Aa Aa The capital budgeting process is comprehensive and is based on certain assumptions, or models and benchmarks that a company follows. This process often begins with project analysis. Generally, the first step in project analysis before using any evaluation method is to estimate the 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 Celestial Crane Cosmetics is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $600,000. The project is expected to generate the following net cash flows Year Cash Flow Year 1 $350,000 Year 2 $500,000 Year 3 $400,000 Year 4 $475,000 Celestial Crane Cosmetics's weighted average cost of capital is 7%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Alpha's net present value (NPV)? s980,625 O s852,717 O 1,202,717 O s 1,452,717 O 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 NPV method, it should project Alpha. Which of the following statements best explains what it means when a project has an NPV of $0