Gaston Company is considering a capital budgeting project that would require a $2,500,000 investment in equipment with a useful life of five years and no salvage value. The companys 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 $ 3,500,000

Variable expenses 1,960,000

Contribution margin 1,540,000

Fixed expenses:

Advertising, salaries, and other fixed out-of-pocket costs $ 620,000

Depreciation 500,000

Total fixed expenses 1,120,000

Net operating income $ 420,000

Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables.

Required: Compute the projects net present value.