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Suppose Fuzzy Button Clothing Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $600,000. The project is
Suppose Fuzzy Button Clothing Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $600,000. The project is expected to generate the following net cash flows: Fuzzy Button Clothing Company's 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)? $1,392,974 $792,974 $1,117,974 $1,242,974 Fuzzy Button Clothing 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 best explains what it means when a project has an NPV of $0? When project has an NPV of $0, the project is earning a rate of return less than the project's cost of capital. It's OK to accept the project, as long as the project's profits is positive. When a project has an NPV of $0, the project is earning a profit of $0. A firm should reject any project with an NPV of $0, because the project is not profitable. When a project has an NPV of $0, the project is earning a rate of return equal to the project's cost of capital. It's OK to accept a project with an NPV of $0, because the project is earning the required minimum rate of return
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