Arnold Inc. is considering a proposal to manufacture high$-$end protein bars used as food supplements by body builders. The project requires use of an existing warehouse, which the firm

acquired three years ago for $$4$ million and which it currently rents out for $$123,000.$ Rental rates are not expected to change going forward. In addition to using the warehouse, the project

requires an upfront investment into machines and other equipment of $$1\mathrm{.}60$ million. This investment can be fully depreciated straight$-$line over the next $10$ years for tax purposes. However,

Arnold Inc. expects to terminate the project at the end of $8$ years and to sell the machines and equipment for $$581,000.$ Finally, the project requires an initial investment into net working capital

equal to $10\%$ of predicted first$-$year sales. Subsequently, net working capital is $10\%$ of the predicted sales over the following year. Sales of protein bars are expected to be $$4\mathrm{.}90$ million in the

first year and to stay constant for $8$ years. Total manufacturing costs and operating expenses $($excluding depreciation$)$ are $80\%$ of sales, and profits are taxed at $28\%.$

a$.$ What are the free cash flows of the project?

b$.$ If the cost of capital is $12\%,$ what is the NPV of the project?