solved Chapter Question Topic: Â You have been hired to evaluate

Chapter Question
Topic:  You have been hired to evaluate a capital investment proposal for a local oil company.  Please calculate the NPV for the following project proposal:  
$400,000 initial cost for equipment  
$25,000 per year additional incremental annual cash revenues for 3 years  
$5,000 per year additional incremental annual cash expenses for first 2 years  
Project ends at the end of year 3 
Minimum required return of 12%    
Assume taxes are irrelevant  
The project managers have already spent $50,000 on preliminary design and architectural expenses. 
Should the project be accepted or rejected?  
Show your calculations for computing the NPV.