Mills Mining is considering the purchase of additional equipment. The proposed project has the following features:

The equipment has an invoice price of $390,000 and will cost $40,000 to modify for company use. Shipping will cost $10,000. The company spent $10,000 last year analyzing 5 competing brands of equipment before deciding that this brand was the best for their purposes. The equipment will be depreciated as a 3-Year MACRS asset with the following rates: Year 1 33%, Year 2 45%, Year 3 15%, and Year 4 7%.

If the project is undertaken, the company will need an increase in net working capital of $40,000. This net working capital will be recovered at the end of the projects three year life.

If the project is undertaken, the company will realize an additional $500,000 in sales over each of the next three years. The companys operating costs (excluding depreciation) will be $200,000 higher over each of the next three years.

If the project is undertaken, old equipment that has been fully depreciated can be sold for $30,000. If the project is not undertaken, the old equipment will last 3 more years, at which time its salvage value will be zero.

The companys tax rate is 40 percent.

At the end of year three, the equipment will have a salvage value of $90,000.

The projects cost of capital is 10 percent.

The net investment (NINV) required to fund this project is

A.

$468,000

B.

$471,000

C.

$465,000

D.

$462,000