A pharmaceutical company is evaluating the production of a new vaccine. It will evaluate the project by discounting the expected cash flows using its WACC. The following information is known:

6 months ago, the firm spent $7,500,000 on research, development and testing in order to confirm the safety and efficacy of the vaccine.

The project requires the purchase of new equipment (in year 0) for $12,000,000. The new equipment has a 6-year lifespan and will be fully depreciated under the straightline method with zero salvage value.

The project will generate sales of $13,500,000 per year and expenses of $6,250,000 per year for years 1-4 after which the firm will no longer be producing the vaccine.

In year 1, the firm must increase its inventory by $2,750,000. It will maintain this level of inventory until the end of year 4.

In year 1, the firm anticipates an increase in accounts receivable equal to 15% of sales and an increase in accounts payable equal to 12% of expenses. Accounts receivable and payable are expected to remain at this level until the end of year 4.

The project will require the firm to use a warehouse it owns (until the end of year 4), that it would otherwise be renting out for $100000,000 per year.

The equipment purchased for the project will be sold at the end of year 5 for $3,200,000.

The firms marginal tax rate is 26%.

a) Compute the incremental free cash flows associated with the project for years 0-5.