Although market information was limited, Bodie thought that BIS had about 35 per cent of the machine tool and equipment market in Barron and the surrounding region. Given the existing market potential, she believed sales could not increase beyond $4 million without expanding BIS's geographical market. For the next two years, she projected sales at $2.8 million for the year ending January 31, 2007, and $3.2 million for the year ending January 31, 2008.

Bodie's major concern was the cramped space in BIS's warehouse. She believed the business could not handle any significant increases in inventory, given its present facilities. In order to maintain BIS's standard of service and delivery, Bodie wanted to add a warehouse extension, estimated at a cost of $200,000, by the beginning of November.

If the loan was approved, principal payments would be $40,000 each year, beginning February 1, 2007, and annual interest payments would be approximately $13,000 for the first two years. In addition to these new loan payments, the combined principal payment on the total amount of all existing long-term debt for fiscal 2007 and 2008 would be $36,528 and $71,924 respectively. The associated annual interest payments on these outstanding liabilities would be $20,914 for 2007 and $35,528 for 2008. Other items on the statement of earnings would remain roughly the same percentage of sales as was experienced in 2006.

Assume a reasonable interest rate.

What is the NPV of taking the loan?