The capital budgeting process is comprehensive and is based on certain assumptions, models, and benchmarks. This process often begins with a project analysis. Generally, the first step in a capital budgeting project analysis-which occurs before any evaluation method is applied-involves estimating the Evaluating cas project's expected cash flows revenues from all new projects The net present e of the most common and preferred criteria that generally lead to good investment decisions. Consider this ca company's net income Suppose Cute Camel Woodcraft Company is evaluating a proposed capital budgeting project (project Alpha) that will require an initial investment of $500,000. The project is expected to generate the following net cash flows: Year Cash Flow Year 1 Year 2 $325,000 400,000 Year 3 425,000 Year 4 400,000 Cute Camel Woodcraft Company's weighted average cost of capital is 8%, 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)? (Note: Do not round your intermediate calculations.) $891,540 $275,252 $775,252 $1,275,252 Making the accept or reject decision Cute Camel Woodcraft 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 project Alpha. Which of the following you ts best explains what it means when a project has an NPV of $0? accept When a proj h 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 less than the project's weighted average cost of capital. It's OK to accept the project, as long as the project's profit is positive. When a project has an NPV of $0, the project is earning a rate of return equal to the project's weighted average cost of capital. It's OK to accept a project with an NPV of $0, because the project is earning the required minimum rate of return