Alset Inc., manufacturers of personalized drones, hires you as a consultant. The market for drones is growing quickly. The firm purchased some land three years ago for $1.44 million expecting to use it as a toxic waste dumpsite. A few months ago Alset Inc. hired another firm to dispose of all toxic materials. Based on a recent appraisal, the firm believes the current market value of the land for $1.54 million on an after-tax basis. In four years, the land could be sold for $1.64 million after taxes. The land will be utilized for the project. The firm also hired a marketing firm to analyze the personalized drone market, at a cost of $129,000. An excerpt of the marketing report is as follows: The flying car industry will have a rapid expansion in the next four years. With the brand name recognition that Alset brings to bear, we feel that the company will be able to sell 4,200, 5,100, 5,700, and 4,600 units each year for the next four years, respectively. Again, capitalizing on the name recognition of Alset, we feel that a premium price of $690 can be charged for each personalized drone. Because these drones appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. Alset believes that fixed costs for the project will be $445,000 per year, and variable costs are 10 percent of sales. The equipment necessary for production will cost $3.9 million and will be depreciated according to a three-year MACRS schedule. At the end of the project, the equipment can be scrapped for $420,000. Net working capital of $129,000 will be required immediately. Alset has a 40 percent tax rate, and the required return on the project is 14 percent. Three year MACRS Schedule Recovery Year 3-Year 1 33.33% 2 44.45% 3 14.81% 4 7.41%

1.

What is the total cash flow for year 0? (Do not use comma or $ signs in your answer. Indicate negative answers with a negative sign)

*hint: Total cash flow or Free cash flow = OCF + Change in NCS + Change in NWC + Opportunity cost