Vernon company has been offered a 7-year contract to supply a part for the military. After careful study, the company has developed the following estimated data relating to the contract:

Cost of equipment needed $300,000

Working capital needed $50,000

Annual cash receipts from the delivery of parts,

Less cash operating costs $70,000

Salvage value of equipment at termination of the contract $5,000

It is not expected that the contract would be extended beyond the initial contract period. The companys discount rate is 10%.

Required:

Use the net present value method to determine if the contract should be accepted. Round all computations to the nearest dollar. (Please show all your works!)