The SCFE Co. wants to add an additional production line. To do this, the company must spend $200,000 to expand its current building, and purchase

$1.0 million in new equipment. The company anticipates moving locations in five years, and it expects to sell its current building and the new equipment at that time. It estimates that the building expansion will add $80,000 to the price the building can be sold for, and that the equipment will have a market value of $290,000 at that time.

The new equipment falls into the MACRS 5-year class, and the building improvements fall into the "nonresidential real estate" MACRS category.

The new production line is expected to produce 100,000 units per year of a new product, which has a projected sales price of $7.75 per unit and a variable cost of $3.90 a unit. Introduction of the new product is expected to cause sales of existing products to decline by $89,000 per year and existing costs to decline by $49,000 per year. Fixed costs of the new line will be $142,000 annually, and the company expects NWC to increase by

$1,800,000 when the new line is added.

The company requires a 15 percent rate of return on projects such as this, and faces a marginal tax rate of 34 percent.

What will be this project's change in NWC in year 5?

a. $0

b. -$360,000

c. -$1,800,000

d. $1,800,000