1. a. Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.18 million. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to genereate $1.645 million in annual sales, with costs of $610,000. The required return is 12%. if the tax rate is 21%, what is the project's NPV (Net Present Value)?

b. In the previous problem, suppose the project requires an initial investment in net working capital of $250,000 and the fixed asset will have a market value of $180,000 at the end of the project. What is the project's Year 0 net cash flow? Year 1? Year 2? Year3? What is the new NPV?