1. A project has an annual net cash inflow (in current terms) of $ 3 million, occuring at the end of each year of the projects two-year life. An investment of $3.5 million is made at the outset. All cash inflows are subject to corporation tax of 30%, payable when the cash is received. There is no tax-allowable depreciation on the initial investment. An average inflation rate of 5% per annum is expected to affect the inflows of the project.

The cost of capital in money terms is 15.5%

What is the expected net present value (NPV) of the project