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 Pheaant Pharmaceuticals is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $400,000. The project is expected to genere the following net cash flows: Year Your Cash Flow $325.000 $400,000 $100,000 Year 2 Year Year 4 $500 100 Pleum Pharmaceuticals weighted average com of capital is 9% and project Alpha has the merlaku the t's very project. Based on the cash flow, what is project Alpha's not prece value (NPV) S1222923 $197.923 5897923 $1.297.923 Making the accept or rejet decision project Pheasant Pharmaceutical's decision to accept or reject project Alpha is independent of its decisions on other projects. If the fiem follows the NPV method, it should Alpha Which of the following statements best explains what it means when a project has an NPV of so? When a project has an NPV of so, the project is earning a protit of $0. A firm should woject any project with an NPV of 50, because the project is not profitable. When a project has an NPV of 50, the project is coming itute of retum equal to the project' weighted wenige cost of capital OK to accept al project with o NPV of $0. because the project bearing the required minimum rate of retum When a project has an NPV of so, the project is earning a rule of return to than the project's weighted average cost of capital. BY OK to accept the project as long as the project's pro it is positive