ABC Company plans to invest capital in new production facilities. It could immediately acquire a modern plant for $ 2,300,000 ($ 500,000 for the land and $ 1,800,000 for the building). The tax depreciation rate on the building is 5% on the declining balance. It will be necessary to acquire a numerically controlled machine tool costing today $ 250,000, depreciable at 20% on the declining balance. ABC could then resell old machines for today's price of $ 25,000 (same depreciation category). Working capital will have to be increased by $ 50,000 (increase in inventory), an amount that is not tax-deductible but fully recoverable in 8 years, at the end of the project. The project is expected to result in net inflows (before tax) of $ 300,000 per year for the first 3 years, and $ 725,000 per year for the following 5 years. ABC estimates that it will be able to resell the land for $ 900,000, the building for 1,400,000, and the new machine at the end of the project.

$ 70,000. The old machines would have had a residual value, in 8 years, of $ 20,000. The corporate tax rate is 25% and the minimum acceptable rate of return is 12%. (Half-year rule applicable)

Calculate the net present value of the project.