Liffey Electrical manufactures an electrical component for the domestic and international markets. The business plan being finalised currently looks to further expansion in export markets.
The following sales estimates are made for the business over the next 5 years:
Year	1	2	3	4	5
Number of Units	540,000	650,000	910,000	1,120,000	1,200,000
The following additional information is provided:
The selling price per unit will be 8.00 in year 1. With the impact of inflation, the firm has decided that the selling price will increase by 5% in year 2. (Year 2 = 8.40)
Marketing strategy dictates that there is no plan to increase the sales price in either year 3, 4 or 5 as the product life cycle matures and the firm builds market share.
The cost of parts is forecast to be 3.00 per unit in year 1, and this will inflate by 4% per annum thereafter. Year 2= 3.12; Year 3 = 3.24; Year 4 = 3.37; Year 5 = 3.51
Labour and overheads will be 1.50 per unit in year 1, which will rise by 0.10 per unit per annum, from year 2.
Incremental fixed costs that are specific to the project are expected to be 750,000 per annum. These fixed costs are not subject to inflation.
Manufacturing equipment required for the project will be purchased at the start of the project for 2,900,000. It is forecast that this equipment will have a residual value of
600,000 at the end of year 5.
Additional working capital of 950,000 is required at the start of the project, this will remain constant during the life of the project and be will released at the end of year 5.
Corporation Tax is payable at the rate of 20% and is paid in the year in which cash flows arise.
The company has a nominal cost of capital of 14%. No capital allowances are available to the company.
Required
(a) Calculate NPV to the nearest 000.					(66 marks)