Gaston Company is considering a capital budgeting project that would require a $$2,200,000$ investment in equipment with a useful life of five years and no salvage value. The company's tax rate is $30\%$ and its after$-$tax cost of capital is $12\%.$ It uses the straight$-$line depreciation method for financial reporting and tax purposes. The project would provide net operating income each year for five years as follows:

Sales

Variable expenses

Contribution margin

Fixed expenses:

Advertising, salaries, and other fixed out$-$of$-$

pocket costs

Depreciation

Total fixed expenses

Net operating income before

tax

References

Required:

Compute the project's net present value.

Net present value