Your company plans to spend $600,000 to develop a prototype. The prototype will succeed with 80% probability. If the prototype fails, the project ends without any additional cashflows. If the prototype succeeds, it will generate annual cashflows for 3 years depending on the demand for the product. Demand will either be strong or weak, with equal probability. If demand is strong, the firm will generate free cash flows of $750,000 for 3 years. If demand is weak, the firm will generate free cash flows of $300,000 instead. The WACC is 14%. What is closest to the expected NPV for this project?
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