You are evaluating a new product. Manurfacturing requires use of an existing warehouse, which you currently lease out to another firm for

$107,000

a

year,

which is not expected to change. You bought it seven years ago for

$1

million. It will require equipment that costs

$1.6

million, which willl be depreciated on a straight-line basis over the next 10 years for tax purposes. The project will last eight years, after which you expect to sell the equipment for

$439,000.

The project requires an investment in net working capital equal to 10 percent of the next years' sales. Sales are expected to be

$4.8

million each year of the project's life. Total costs and expenses (excluding depreciation) are 80 percent of sales, and the tax rate is 30 percent.

a. What is the NPV of the project if the cost of capital is

15%?