Superserv Inc. intends to acquire new equipment for $10 million and has an

estimated life of 5 years and a salvage value of $800K. The new equipment is

expected to allow additional annual sales of $5 million over the next 5 years.

The associated additional annual costs are expected to be $3 million. In addition,

working capital will increase by $1.2 million at the outset. The project's cost of

capital is 10%. The firm's tax rate is 40%. The annual depreciation charge on the

new machine is $2 million. What is the project's NPV?

NOTE: The answer is ($-2.5753m)