Gaston Company is considering a capital budgeting project that would require a $ 2,000,000 investment in equipment with a useful life of five years and no salvage value. The company€™s tax rate is 30% and its after-tax cost of capital is 13%. It uses the straight-line depreciation method for financial reporting and tax purposes. The project would provide net operating income each year for five years as follows:

Required:
Compute the project€™s net present value.

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Sales . Variable expenses .. *.. Contribution margin. .. Fixed expenses: $2,800,000 1,600,000 1,200,000 Advertising, salaries, and other fixed Depreciation400,000 Total fixed expenses Net operating income .. 900,000 300,000 ..