The production machinery of Xaghogh is nearing the end of its useful life and it needs to be replaced. Forecasts have been made for the initial capital cost, proportional sales income and operating costs of the replacement machine, which is expected to have a useful life of three years:

Initial Investment	$500000
Cash Flows are as follow
Year	Sales Income	Operating costs
1	$280000	$100000
2	$330000	$120000
3	$390000	$130000

The company appraises capital investment projects using a cost of capital of 10% per annum.

What is the NPV of this machine? The Discount factor of 10% is as follows

Year	DF
0	1.000
1	0.909
2	0.826
3	0.751

a.

$850,000

b.

$1,032,340

c.

$150,000

d.

$32,340