Evaluating a potential project Sky Growth Ltd.'s ambitious finance manager provides the following information with regards to a possible new project and wants you to evaluate whether the company should proceed with the project.

Purchase price of equipment $6 million

Expected life of equipment 7 years

Tax depreciation of equipment $1 million p.a.

Scrap value of equipment after 7 years $350 000

Company tax rate 30% p.a.

Required rate of return 11% p.a.

Expected sales $3.0 million p.a.

Operating costs (excl. interest and depreciation) $1.5 million p.a.

Finance for the equipment 7-year bank loan with interest @ 9.5% p.a.

Prepare a detailed NPV analysis of the project and recommend whether the project should go ahead or not.