Suppose Pheasant Pharmaceuticals 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	$350,000
Year 2	$475,000
Year 3	$500,000
Year 4	$450,000

Pheasant Pharmaceuticalss weighted average cost of capital is 9%, 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)?

$1,179,649

$1,525,782

$1,025,782

$1,425,782

Pheasant Pharmaceuticalss 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/reject) project Alpha.

Which of the following statements best explains what it means when a project has an NPV of $0?

a. 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.

b. 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.

c. 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.