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

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.