Question
Happy Dog Soap Company is considering investing $400,000 in a project that is expected to generate the following: Year 1-300,000, Year 2-425,000, Year 3-450,000, Year
Happy Dog Soap Company is considering investing $400,000 in a project that is expected to generate the following: Year 1-300,000, Year 2-425,000, Year 3-450,000, Year 4-425,000. A: Happy Dog Soap Company uses a WACC of 10% when evaluating proposed capital budgeting projects. Based on these cash flows, determine this projects PI: 2.6612, 3.4439, 3.1308, 2.5046
B: Happy Dog Soap Company's decision to accept or reject this project is independent of its decisions on other projects. Based on the project's PI, the firm should reject/accept the project.
C: By comparision, the NPV of this project is 852,339/809,722/452,399/937,573/1,022,807/681,871. On the basis of this evaluation criterion, Happy Dog Soap company should invest/not invest in the project because the project wll/will not increase the firm's value.
D: When a project has a PI greater than 1.0, it will exhibit an NPV greater than 0/less than 0 or equal to 0; when iit has a PI of 1.0, it will hae an NPV equal to $0. Projects wtih PIs less than/equal to/greater than 1.0 will exhibit negative NPV's.
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