Gaston Company is considering a capital budgeting project that would require a $3,300,000 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:

Required:

Compute the projects net present value.

Sales $3,400,000 1,600,000 1,800,000 Variable expenses Contribution margin Fixed expenses: Advertising, salaries, and other fixed out- $680,000 of-pocket costs 660,000 Depreciation Total fixed expenses 1,340,000 460,000 Net operating income Required: Compute the project's net present value. Net present value