Kell Inc. is analyzing an investment for a new product expected to have annual sales of 100,000 units for the next 5 yea

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Kell Inc. is analyzing an investment for a new product
expected to have annual sales of 100,000 units for the next 5 years
and then be discontinued. New equipment will be purchased for
$1,200,000 and cost $300,000 to install. The equipment will be
depreciated on a straight-line basis over 5 years for financial
reporting purposes and 3 years for tax purposes. At the end of the
fifth year, it will cost $100,000 to remove the equipment, which
can be sold for $300,000. Additional working capital of $400,000
will be required immediately and needed for the life of the
product. The product will sell for $80, with direct labor and
material costs of $65 per unit. Annual indirect costs will increase
by $500,000. Kell's effective tax rate is 40%.
In a capital budgeting analysis, what is the expected
cash flow at time=5(fifth year of operations) that Kell should use
to compute the net present value?
(Hint: Use MACRS as depreciation expenses)