a. Parker Products manufactures a variety of household products. The company is considering introducing a new detergent. The company's CFO has collected the following information about the proposed product. (Note: You may or may not need to use all of this information, use only the information that is relevant.)

	The project has an anticipated economic life of 3 years.
	The company will have to purchase a new machine to produce the detergent. The machine has an up-front cost (t = 0) of $2.1 million. The machine will be depreciated on a straight-line basis over 3 years (that is, the company's depreciation expense will be $700,000 in each of the three years (t = 1, 2, and 3). The company anticipates that the machine will last for three years, and that after four years, its salvage value will equal zero.
	If the company goes ahead with the proposed product, it will have an effect on the company's net operating working capital. At the outset, t = 0, inventory will increase by $600,000 and accounts payable will increase by $220,000. At t = 3, the net operating working capital will be recovered after the project is completed.
	The detergent is expected to generate sales revenue of $3 million the first year (t = 1), $4 million the second year (t = 2), and $5 million the third year (t = 3). Each year the operating costs (not including depreciation) are expected to equal 50 percent of sales revenue.
	The company's interest expense each year will be $200,000.
	The new detergent is expected to reduce the after-tax cash flows of the company's existing products by $400,000 a year (t = 1, 2, and 3).
	The company's overall WACC is 12 percent. However, the proposed project is riskier than the average project for Parker; the project's WACC is estimated to be 13 percent.
	The company's tax rate is 40 percent.

Estimate the project net cash flows. Make sure to put the cash flows in order: CF0 in box 1, CF1 in Box 2, CF2 in Box 3, etc. Round it to a whole dollar, and do not include the $ sign. In box 5 (last one), compute the project's NPV. Round it to a whole dollar, and do not include the $ sign.

b.

The president of Real Time Inc. has asked you to evaluate the proposed acquisition of a new machine. The machine's price is $50,000, and it falls into the MACRS 3-year class. Purchase of the machine would require an increase in net operating working capital of $5,000. The machine would increase the firm's before-tax revenues by $20,000 per year but would also increase operating costs by $11,000 per year. The computer is expected to be used for 3 years and then be sold for $19,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 14 percent. What is the total value of the terminal year non-operating cash flows at the end of Year 3? Round it to a whole dollar, and do not include the $ sign.

Year	MACRS Percent
1	0.33
2	0.45
3	0.15
4	0.07