Suppose Lumbering Ox Truckmakers is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $450,000. The project is expected to generate the following net cash flows:

Year	Cash Flow
Year 1	$325,000
Year 2	425,000
Year 3	425,000
Year 4	425,000

Lumbering Ox Truckmakerss weighted average cost of capital is 7%, and project Alpha has the same risk as the firms average project. Based on the cash flows, what is project Alphas net present value (NPV)? (Note: Do not round your intermediate calculations.)

$446,107

$1,321,107

$1,075,328

$896,107

Lumbering Ox Trackmakers 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. (accept/reject)

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 projects weighted average cost of capital. Its OK to accept the project, as long as the projects 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 the project is not profitable.

When a project has an NPV of $0, the project is earning a rate of return equal to the projects weighted average cost of capital. Its OK to accept a project with an NPV of $0, because the project is earning the required minimum rate of return.