David, the companys sales manager, is worried that B5 could damage the sales of another battery product called B2 currently produced by the company. B2 and B5 are similar products but B2 is less technologically advanced, and David is concerned that customers who originally intend to purchase B2 will now purchase B5 instead. He estimates that the potential loss in the sales of B2 due to this reason could reduce B2s contribution to Quality Products after-tax cash flows by $350,000 per year in the coming four years.

The after-tax real required rate of return of Quality Products is 9% per year.

The company pays profit tax one year in arrears at a rate of 30% per year. Ignore tax allowable depreciation.

Monetary amounts given above are nominal amounts unless stated or indicated otherwise.

Required:

Determine the NPV of the B5 project. Advise the company whether the project should be launched.