WBA is an umbrella manufacturer. It is a mature business that earned EBITDA of $1,200k on revenues of $ 6M in the most recent year and is expected to continue to generate these figures in perpetuity.

But theres an alternative. The capital investment project that must improve the value of the business, sales and operating profit. The idea is to increase the volume of inventory to be more responsive on customers demand.

To carry inventory, the company will have to invest 1.5 M in a storage facility, which will be depreciated straight line over 10 years

With the inventory, the company expects its annual revenue to increase from current $6M to $8.5 M and its overall EBITDA margin increases to 22.5%. This level of revenue and EBITDA assumes to be stable during 10 years.

For the next decade (10 years), the inventory will be maintained at 7% of total revenues, with the investment made at the start of the year. Before that company had the same level of inventory vs. sales = $420k of average year-end balance.

The cost of capital for the company is 12% and the tax rate is 25%.

On 10^th year the warehouse is expected to be sold for 5% of initial investment (salvage value).

Estimate the NPV of the project (carrying inventory) assuming at ten-year life for the investment.