A firm is considering an investment in capital equipment. The equipment requires an initial cash outflow of $1,000,000, out of which $700,000 is financed with debt at a 4% cost of debt (k_d) amortized as a regular annuity over 3 years, and $300,000 is financed with equity at a cost of equity of 12% (k_e). The tax rate (t) is 30%. Given the 3-year life of the equipment, the depreciation schedule is as follows: Year 1, $333,000; Year 2, $445,000; Year 3, $148,000; and Year 4, $74,000.

Some basic cash income and cash expense data for this equipment is shown below.

Operating Cash Income_t (OI_t) is $800,000 per year, years 1 to 3.

Operating Cash Expense_t (OE _t) is $300,000 per year, years 1 to 3.

This investments Arditti-Levy method Net Cash Flow for Year 1 is:

	a.	$430,300
	b.	$206,056
	c.	$97,300
	d.	$458,300