Pappys Potato has come up with a new product, the Potato Pet (they are freeze-dried to last longer). It is expected that Potato Pet will generate sales of $575,000 per year. The fixed costs associated with this will be $200,000 per year, and variable costs will amount to 25 percent of sales. The equipment necessary for production of the Potato Pet will cost $950,000 and will be depreciated to zero in a straight-line manner for the four years of the product life. (As with all fads, it is felt the sales will end quickly. The salvage value of the equipment will be zero at the end.) The equipment will require an increase in working capital (spare parts inventory) of $8,000 at the beginning, which will be recaptured at the end. Pappys is in a 35 percent tax bracket and has a required return of 15 percent.

What is the breakeven level of annual sales? (What sales level will make the NPV equal zero?