Cash Flows and NPV $($LO$2)$ We project unit sales for a new household$-$use laser$-$guided

cockroach search and destroy system as follows:

Year Unit Sales

$193,000$

$2105,000$

$3128,000$

$4134,000$

$587,000$

The new system will be priced to sell at $$380$ each.

The cockroach eradicator project will require $$1,800,000$ in net working capital to start, and total net working capital will rise to $15\%$ of the change in sales. The variable cost per unit is $$265,$ and total fixed costs are $$1,200,000$ per year. The equipment necessary to begin production will cost a total of $$24$ million. This equipment is mostly industrial machinery and thus qualifies for CCA at a rate of $20\%.$ In five years, this equipment will actually be worth about $20\%$ of its cost.

The relevant tax rate is $35\%,$ and the required return is $18\%.$ Based on these preliminary

estimates, what is the NPV of the project?