Tesli Bikes Ltd is analysing a potential investment in a new e$-$bike. The new product

will generate incremental revenues of $$1,250,000$ per year for $10$ years. The

incremental operating costs of producing the new e$-$bike are projected to be

$$400,000$ per year. As a result of the increased production, Tesli will qualify for

volume discounts on packaging. These discounts will save Tesli $$25,000$ per year

$($before tax$)$ on packaging purchased for its existing product lines. The initial capital

expenditure to purchase production equipment will be $$2,500,000.$ Producing and

distributing the new product will increase the working capital requirements of the

business by $$90,000$ for the life of the project. This investment in working capital will

be fully recovered when product is discontinued in $10$ years. For tax purposes, the

production equipment can be depreciated on a straight$-$line basis to zero over $10$

years. Tesli Bikes expect that at the end of the $10$ years the scrap value of the

equipment will be $$450,000.$ Tesli Bikes face a corporate tax rate of $30\%$

Calculate the NPV of the potential investment assuming a required return on $12\%$