Suppose Hungry Whale Electronics is evaluating a proposed capital budgeting project (project Alpha) that will require an initialinvestment of $400,000. The project is expected to generate the following net cash flows:YearCash FlowYear 1$325,000Year 2$475,000Year 3$475,000Year 4$450,000Hungry Whale Electronics's weighted average cost of capital is 9%, and project Alpha has the same risk as the firm's average project. Based on thecash flows, what is project Alpha's net present value (NPV)?$1,131,073$983,542$1,458,542$1,433,542 Hungry Whale Electronics's decision to accept or reject project Alpha is independent of its decisions on other projects. If the firm follows the NPVmethod, it shouldproject Alpha.Which of the following statements best explains what it means when a project has an NPV of $0?When a project has an NPV of $0, the project is earning a rate of return less than the project's weighted average cost of capital. It's OK toaccept the project, as long as the project's profit 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 theproject is not profitable.O When a project has an NPV of $0, the project is earning a rate of return equal to the project's weighted average cost of capital. It's OK toaccept a project with an NPV of $0, because the project is earning the required minimum rate of return.

Net present value = Present value of cash flows - Initial investment

Suppose Hungry Whale Electronics 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 $325,000 Year 2 $475,000 Year 3 $475,000 Year 4 $450,000 Hungry Whale Electronics's weighted average cost of capital is 9%, 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)? O $1,131,073 O $983,542 O $1,458,542 O $1,433,542

Suppose Hungry Whale Electronics 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 $325,000 Year 2 $475,000 Year 3 $475,000 Year 4 $450,000 Hungry Whale Electronics's weighted average cost of capital is 9%, 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)? O $1,131,073 O $983,542 O $1,458,542 O $1,433,542

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 2PA: Jasmine Manufacturing is considering a project that will require an initial investment of $52,000...

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