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 the case of Black Sheep Broadcasting Company: Suppose Black Sheep Broadcasting Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $550,000. The project is expected to generate the following net cash flows: Year Cash Flow $325,000 Yeart Year 2 $500,000 Year $500,000 $425,000 Year 4 The company's weighted average cost of capital is 8%, and project Alpha has the same risk as the firmy average project. Based on the cash flows, what is project. Aiphe's not present value (NPV)? 1888,099 51,438,999 $336,899 $1,066,670 The company's weighted average cost of capital in B%, 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)? $888,899 O $1,435,899 $338,899 $1,066,679 Making the accept or reject decision Black Sheep Broadcasting Company'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 hest explains what it means when a project has an MPV of 50% When a promet has an NPV or so, the project teaming a rate of returns than the projects weighted average cost of capital is OK to at the project, as long as the project's profit la poutie When a project has an MPV of so, the project is coming a profit of 50. A fim should reject any project with an NPV of so, because the project is not profitable When a project has an NPV of so, the project is caring a rate of return equal to the project's weighted average cost of capital. It's OK to compt project with an NPV of 50, because the project is coming the required rate of retum