consider the case of Happy Dog Soap Company:

Happy Dog Soap Company is considering investing $550,000 in a project that is expected to generate the following net cash flows:

Year	Cash Flow
Year 1	$275,000
Year 2	$475,000
Year 3	$400,000
Year 4	$500,000

Happy Dog uses a WACC of 7% when evaluating proposed capital budgeting projects. Based on these cash flows, determine this projects PI (rounded to four decimal places).

2.0070

2.2579

2.7597

2.5088

Happy Dogs decision to accept or reject this project is independent of its decisions on other projects. Based on the projects PI, the firm should ____ the project.

By comparison, the net present value (NPV) of this project is ___ . On the basis of this evaluation criterion, Happy Dog should ____ in the project because the project ____ increase the firms value.

When a project has a PI greater than 1.00, it will exhibit an NPV ___; when it has a PI of 1.00, it will have an NPV equal to $0. Projects with PIs ____ 1.00 will exhibit negative NPVs.