1. Net present value (NPV) 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 Blue Hamster Manufacturing Inc. is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $400,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 $350,000 $400,000 $425,000 $475,000 Year Year 4 Ch 11- Assignment. The Basics of Capital Budgeting Blue Hamster Manufacturing Inc.'s weighted average cost of capital is 7%, 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)? $1,385,780 $985,780 $1460,780 $1,133,647 Moking the accept or reject decision Blue Monster Manufacturing Inc 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 $07 When a project has an NPV of so, the project is aming profit of so. A firm should reject any project with an NPV / 0, becue the project ofte When a project hawan Nov of so, the project scaring a rate of return less than the project weighted average cost of capital or OK 10 accept the project, along as the project's propost When a chasan of so, the project caring a note of return equal to the project weighted average cost of capital It's OK 10 copt a project with an NP of $0, because the project is carring the required minimum rate of retum