The CFO of Casio Industries is considering the launch of a new fuel cell powered calculator to its existing line of college supplies. The horizon of the project has been estimated to be 5 years. The machine that will manufacture the calculators costs $1.5 million, and will be depreciated using the straight line method to zero book value over 15 years. Projected sales are $475,000 in year 1, $525,000 in year 2, $575,000 in year 3, and so on ($50,000 increase until year 5). Annual costs are estimated to be 22% of the current year sales. The CFO believes that the machine can be sold at the end of the project for $600,000. Working capital requirements are estimated to be 5% of the following year sales (so NWC at time 0 is 5% of sales at time 1, and so forth). If the project is taken, it will use an existing office space for which the company paid $550,000 three years ago, and that can be rented today for $40,000 a year, to be paid at the end of each year. The tax rate is 40%.

Forecast the project (unlevered) cash flows that you should discount.

What is the NPV of the project if the cost of capital (discount rate) is 10%?