Rearden Metal can invest in a risk-free technology that requires an up-front investment of $1 million. Rearden's managers are hesitant to invest because of uncertainty over future interest rates. Suppose that all interest rates will be either 8% or 4% in one year and remain there forever. The risk-neutral probability that interest rates will drop to 4% is 40%. The one-year risk-free interest rate is 5% and today's rate on a risk-free perpetual bond is 6%. The rate on an equivalent perpetual bond that is repayable at any time (the callable annuity rate) is 7.65%.

Q. Assuming that this project will provide Rearden with perpetual annual cash flows of $55,000, the NPV of investing in the project today is closest to:

	A.	-$281,000.
	B.	-$150,000.
	C.	-$83,000.
	D.	+$83,000.
	E.	+$281,000