Blair Bookstores is thinking about expanding its facilities. In considering the expansion, Blairs finance staff has obtained the following information:

• The expansion will require the company to purchase today (t = 0) $5 million of equipment. The equipment will be depreciated over the following four years at the following rate:

Year 1: 33%

Year 2: 45

Year 3: 15

Year 4: 7

• The expansion will require the company to increase its net operating working capital by $500,000 today (t = 0). This net operating working capital will be recovered at the end of four years (t = 4).

• The equipment is not expected to have any salvage value at the end of four years.

• The companys operating costs, excluding depreciation, are expected to be 60% of the companys annual sales.

• The expansion will increase the companys dollar sales. The projected increases, all relative to current sales are:

Year 1: $3.0 million

Year 2: 3.5 million

Year 3: 4.5 million

Year 4: 4.0 million

After the fourth year, the equipment will be obsolete, and will no longer provide any additional incremental sales.

• The companys tax rate is 40% and the companys other divisions are expected to have positive tax liabilities throughout the projects life.

• If the company proceeds with the expansion, it will need to use a building that the company already owns. The building is fully depreciated; however, the building is currently leased out. The company receives $300,000 before-tax rental income each year (payable at year end). If the company proceeds with the expansion, the company will no longer receive this rental income.

• The projects WACC is 10%.

What is the expected project's NPV, if:

Scenario 1: cash flows are as per data provided above.

Scenario 2: NOWC = $400,000, Sales Year1=2.7, Year2=3.2, Year3=4 and Year5=3.8 and tax rate increase to 45%. All else remain same.

Scenario 3: Year1= NOWC = $550,000, Sales Year1=3.3, Year2=3.8, Year3=4.7 and Year5=4.2 and company has to rent a new facility at $100,000. All else remain same.