A project is being considered that has the following:

1. $40 million of capital equipment up front. Assume straight line depreciation for the capital equipment over five years

2. Staring in year one, sales revenue is to be $5 million per year.

3. Costs are anticipated to be 40% of sales.

4. Operations will generate accounts receivable equal to 40% of sales and accounts payable equal to 40% of costs, both starting in year one.

5. The corporate tax rate is 21%.

Question:

Forecast the free cash flows for this project for years 0, 1 and 2. Please show your work using traditional formulas not excel.