Suppose Lumbering Ox Truckmakers 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: Lumbering Ox Truckmakers's weighted average cost of copital is 8%, and project Alpha has the same risk as the firm's average project. Based on the cash flows, what is project Aipha's net present value (NPV)? $1,022,932$1,439,506$1,389,506$889,506 Making the accept or reject decision the accept or reject decision Lumbering Ox Truckmakers's decision to accept or reject project Alpha is independent of its decisions on other projects. If the firm follows the NPV method, it shouid project Alpha. Which of the following statements best explains what it means when a project has an NPV of $0 ? When a prolect has an NoV 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 50 , the project is eaming a rate of return less than the project's weighted average cost of capital. It's OK to accept the project, as long as the project's profit is positive. When a project has an NPV of 50 , the project is earning a rate of return equal to the project's weghted average cost of capital. its oK to accept a project with an NPV of 50, because the project is earning the required minimum rate of return. Blue Llama Mining Company is evaluating a proposed capital budgeting project (project Sigma) that will require an initial investment of $900,000. Blue Llama Mining Company has been basing capital budgeting decisions on a project's NPV; however, its new CFO wants to start using the IRR method for capital budgeting decisions. The CFO says that the IRR is a better method because returns in percentage form are easier to understand and compare to required returns. Blue Llama Mining Company's WACC is 9%, and project Sigma has the same risk as the firm's average project. The project is expected to generate the following net cash flows: Which of the following is the correct calculation of project Sigma's IRR? 31.36% 30.00% 27.27% 24.54% If this is an independent project, the IRR method states that the firm should If the project's cost of capital were to increase, how would that affect the IRR? The IRR would decrease. The IRR would not change. The IRR would increase