An athleticwear company is considering releasing a new line of sneakers. The company believes that it will be able to sell 100,000 pairs of sneakers each year, at a price of $110 per pair. Variable costs will be $22 for each pair of shoes, and there will be fixed costs of $3 million each year. To produce these sneakers, the company will have to expand its existing factory and warehouse space (a capital expenditure) which will cost $8 million right away and will be depreciated at 25% of this cost each year (i.e., there is a $2 million depreciation expenditure each year). What would be the cash flow from assets (i.e., the total free cash flow) that the firm would generate in the projects first year?

-2,884,000

3,116,000

4,756,000

5,116,000 - this is the correct answer

5,251,000