Business, 03.12.2019 02:31 caggh345

Suppose fuzzy button clothing company 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 1 $325,000

year 2 $500,000

year 3 $500,000

year 4 $500,000

fuzzy button clothing company'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)?

a. $1,455,054

b. $1,356,065

c. $1,130,054

d. $730,054

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 accept or reject project alpha.

Answers: 2

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