Sally Omar is the manager of the office products division of Wallace Enterprises. Currently, Sally is considering investing $40,000,000 in modernization of the division plant in Tennessee.

She estimates that the project will generate cash savings of $6,550,000 per year for 8 years. The plant improvements will be depreciated over 8 years ($40,000,000 / 8 years = $5,000,000). Thus, the annual effect on income will be $1,550,000 ($6,550,000-$5,000,000).

Under a discount rate of 10% calculate the NPV of the modernization project.