Innovation Inc. sells tablets and smartwatches. The company is considering a new 5-year project that would utilize existing equipment. This equipment was purchased 2 years ago for $812,500 and has a current market value of $625,000. The project will also increase inventory by $50,000 and accounts payable by $66,000. All net working capital will be recovered at the end of the project. The fixed assets will be depreciated on a straight-line basis to zero over the life of the project, and will be salvaged for $20,000 at the end of the project.

Last year, Innovation Inc. sold 8,600 smartwatches for $60 each, and 5,200 tablets for $110 each. After purchasing the new equipment, Innovation Inc. expects to sell 10,000 smartwatches for $55 each and 14,000. The price of tablets will remain unchanged.

The new equipment will reduce the variable cost of smartwatches from $50 to $42. The variable cost of tablets is expected to remain $75. The project will also reduce fixed production costs by $18,000 annually.

Innovation Inc. faces a 21 percent tax rate and the company's discount rate is 12.8 percent.

Calculate the total incremental revenues from this project.

Calculate the Operating Cash Flow for this project.

Identify the project cash flow in Year 0.

Identify the project cash flow in year 5.

Compute the NPV for this project.