Ace Hardware has come up with a new gadget prototype and is ready to go ahead with pilot production and test marketing. The pilot production and test marketing phase will last for one year and cost $480,000. Your management team believes that there is a 55% chance that the test marketing will be successful and that there will be sufficient demand for the new gadget. If the test-marketing phase is successful, then Ace Hardware will invest $2.8 million in year 1 to build a plant that will generate expected annual after-tax cash flows of $380,000 in perpetuity beginning in year 2. If the test marketing is not successful, Ace Hardware can still go ahead and build the new plant, but the expected annual after-tax cash flows would be only $180,000 in perpetuity beginning in year two. Ace Hardware has the option to stop the project at any time and sell the prototype to an overseas competitor for $250,000. Ace Hardware's cost of capital is 8.60%. Assuming that Ace Hardware has the ability to sell the prototype in year 1 for $250,000, what is the NPV of the Ace Hardware's gadget project?

		$443,326.48
		$413,243.48
		$383,160.48
		$353,077.48
		$322,994.48