Evaluating cash flows with the NPV method The net present value (NPV) rule is considered one of the most common and preferred criteria that generaliy lead to good investment decisions. Consider this case: Suppose Green Caterpillar Garden Supplies Inc, is evaluating a proposed capital budgeting project (project Alpha) that wal require an initial investment of $500,000. The project is expected to generate the folowing net cash fiows: Green Caterpillar Garden Supplies Inc.'s weighted average cost of capital is 9 W. and project Alpha has the same risk as ehe firms average project. Based on the cash fows, what is project Alpha's net present value (NPV)? $916,915 $878,710 5764,096 $1,189,096 Green Caterpillar Garden Supplies Inc.'s weighted average cost of capital is go,; and project Alpha has the same risk as the firm's twerage project. Based on the cash flows, what is project Apha's net present value (NPV)? $916,915 $878,710 $764,096 31,189,096 Making the accept or reject decision Green Caterpiliar Garden Supplies Inci's decision to accept or reject project Alpha is independent of its decisions on other prejects- if the firt to iowi the NPV method, it shoeld project Alpha, Which of the following statements best explains what it means when a project has an NFV of so? When a project has an NPV of $0, the project is eaming a profit of $0. A firm should reject any project with an NDy of $0, because the project is not profitable. When a project has an NPV of $0, the project is earning a rate of return less than the project's weighted average cost of capsai, tt CK 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 rate of return equal to the project's weighted average cest of capitali it's ok to acrant a nroinct with an NPV of $0, because the project is earning the required minimum rate of return. Green Caterplliar Garden Supplies Incis weighted average cost of capital is 9%, and project Apha has the same risk as the firm's average project. Based on the cash fows, what is project Alpha's net present value (NPW)? $916,915 $878,710 \$764,096: $1,189,096 Making the accept or reject decision Green Caterpilar 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 Apha. Which of the following stat sst explains what it means when a project has an NPY of 50? When a project r f of $0, the project is eaming a profit of $0. A firm should reject any groject with an NPV of $0, because the project is not profitable. When a project has an NPV of $0, the project is eaming a rate of return less than the project's weighted 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 NFY of $0, the project is eaming a rate of retum equal to the project's weighted average cost of capital. It's oK to
