Better Tires Corp. is planning to buy a new tire making machine for $40,000 that would save it $30,000 per year in production costs. The savings would be constant over the project's 3-year life. The machine is to be linearly depreciated to zero and will have no resale value after 3 years.

The company uses a weighted average cost of capital of 16% and has a tax rate of 21%.

1. What is the free cash flow in each year of operation (years 1 to 3)?

2. What is the NPV of this project?