A firm is considering a five-year expansion project to take advantage of a higher demand for the product. The project requires an initial investment in fixed assets of $25,000,000, which will be depreciated straight-line to zero over the five-year project life. The expected operating cash flow (OCF) for each year over the five-year life of the project is provided below.

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Year Expected operating cash flow (OCF)*

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1 $6,000,000

2 $8,000,000

3 $10,000,000

4 $7,000,000

5 $5,000,000

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*Defined as after-tax net income + depreciation expense

The firm expects to have a before-tax salvage value (or resale value) of the fixed assets of $8,000,000 at the end of the project. It also has net working capital (NWC) requirements (or net working capital cash flows) of $500,000 in Year 0, $600,000 in Year 1, $800,000 in Year 2, $1,000,000 in Year 3, $700,000 in Year 4, and $3,600,000 in Year 5. Note that the net working capital cash flow given for each year is the change in net working capital from the prior year (Value at the end of the year Value at the beginning of the year), not the total net working capital for the year (except for Year 0 where the total NWC is the same as the change in NWC). The tax rate is 25 percent.

The companys capital structure consists of 30 percent debt and 70 percent equity. The firm has a before-tax cost of debt (i.e., yield to maturity) of 7 percent per year and a levered equity beta of 1.60. The annual risk-free rate and market risk premium are 5 percent and 6 percent, respectively. Assume that the project has the same capital structure and the same risk as the firm overall. Find the net present value (NPV) of the project.