Blox Inc is considering a four-team project involving the purchase of equipment costing $1.2 million. Tax allowable depreciation would be 25% per annum straight line. The Board of Directors expect this equipment to generate sales of $2.4 million per annum and have calculated that cost of sales (after depreciation) will increase by $1.8 million per annum.

Variable costs are estimated to be one third of sales and consist of 25% direct labour costs and 75% materials costs. General fixed overheads (not including depreciation) are absorbed into product costs at the rate of 150% of direct labour costs. Taxation is charged at 35% of profits and is payable one year in arrears. The after tax cost of capital is 16%. What, to the nearest $1000, is the NPV of this project?

The annuity factor at 16% for years 1-4 is 2.798 and 2.412 for years 2-5