OILS of Lapital Budgeting 1. Net present value (NPV) Q Search 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 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 Year 1 Year 2 Year 3 Year 4 Cash Flow $325,000 $500,000 $500,000 $425,000 Black Sheep Broadcasting Company's weighted average cost of capital 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) $1,438,899 $338,899 5888,899 M UUJILI UI Capital Budgeting OX TED Year Year 1 Year 2 Year 3 Year 4 Cash Flow $325,000 $500,000 $500,000 $425,000 atalog offers cions Success Tips Black Sheep Broadcasting Company's weighted average cost of capital 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)? Success Tips $1,438,899 D FOR YOU $338,899 dy Tools $888,899 $1,066,679 for Introductory Finance 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 Feedback Credit Now Save & Con