Bull Market Bottling, Inc. has developed a new wine bottle. It can go into production for an initial investment in equipment of $6,100,000. The equipment will be depreciated using the MACRS 7-Year schedule, and will be sold after six years for $550,000. The firm believes that, starting in Year 0, working capital at each date must be maintained at a level of 10% of the following year's sales forecast. All working capital will be recovered at the end of the project. The firm estimates production costs equal to $1.60 per bottle to start. It is also expected that the cost to produce these bottles will increase with the rate of inflation. The firm believes that the bottles can be sold for $4.15 each. The firm also expects to increase the sale price of the bottles to keep up with the rate of inflation. The firm's tax bracket is 34%, the firm's cost of capital is 11.50%, and inflation is expected to be 2.20% per year for the foreseeable future. The unit sales forecast is given in the table below.

Year Units

0 0

1 600,000

2 700,000

3 900,000

4 1,000,000

5 500,000

6 300,000

What is the Year 1 Free Cash Flow?

		$1,258,283,.60
		$1,054,139.74
		$1,177,830.16
		$1,338,413.22
		$2,014,266.01