Ch 11: Assignment - The Basics of Capital Budgeting Consider this case: Suppose Happy Dog Soap Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of 5400,000 . The project is expected to generate the following net cash flows: Happy Dog Soap Company's weighted average cost of cap tal is 8\%, 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)? 5958,055 51,101,763 51,408,055 5558,055 Making the accept or reject decision Happy Dog Soap Company's decision to accept or reject project Alpha is independent of its decis ons 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 capital, 1t's OK to accept a project with an NPV of so, because the project is eaming the required minimum rate of return. When a project has an NPV of 50, the project is earning a rate of return less than the project's weighted average cost of capital. Ir's OK to accept the project, as long as the project's profic is positive. When a project has an NPV of 50 , the project is earning a profit of 50 . A firm should reject any project with an NPV of so, because the project is not profitable