A project requires an initial investment of $200,000 in a machine and is expected to produce cost savings of $120,000 each year for two years. The tax rate is 30%. The machine will be depreciated using the MACRS 3-year schedule (first year 33%, second year 45%, third year 15% and fourth year 7%). The machine can be sold for $50,000 after two years. The projects required return is 11%.

(1) What is the initial cash flow at t=0?

(2) What are the operating cash flows in year 1 and 2?

(3) What is the year 2 terminal cash flow?

(4) What is the NPV of the project?