A firm is considering replacing its aging production equipment. The firm has a cost of capital of 9.5%. Its marginal tax rate is 40%. The new equipment will cost $1.2M inclusive of shipping and installation. It will have an expected life of 5 years. Revenues are expected to increase $600K the first year and $50K a year thereafter. The company uses straight line depreciation and no salvage value is assumed. The old equipment is fully depreciated and can be sold today for $50K. Expenses will increase $96K the first year and increase $25K each year thereafter. The week long training seminar will be held in Toronto and will cost $10K. Net working capital will increase $40K. We think we can sell the new equipment for $75K in five years.
What is the net initial investment, annual cash flow, and terminal value?