Lander Company has an opportunity to pursue a capital budgeting project with a five-year time horizon. After careful study, Lander estimated the following costs and revenues for the project: Cost of equipment needed $ 250,000 Working capital needed $ 62,000 Overhaul of the equipment in two years $ 19,000 Annual revenues and costs: Sales revenues $ 370,000 Variable expenses $ 190,000 Fixed out-of-pocket operating costs $ 84,000 The piece of equipment mentioned above has a useful life of five years and zero salvage value. Lander uses straight-line depreciation for financial reporting and tax purposes. The company's tax rate is 30% and its after-tax cost of capital is 14%. When the project concludes in five years the working capital will be released for investment elsewhere within the company.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1.Calculate the annual income tax expense for each of years 1 through 5 that will arise as a result of this investment opportunity.

2.Calculate the net present value of this investment opportunity. (Negative amounts should be indicated by a minus sign. Round discount factor(s) to 3 decimal places.)