DeLuxe Furniture is thinking of buying a wood cutting machine for $160,000 that would save it $40,000 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 machine would require an additional $6,000 in net operating working capital. The appropriate cost of capital for this project is 10% and the company's tax rate is 35%.

	Year 0	Year 1	Year 2	Year 3
Cost savings	0	40,000	40,000	40,000
Depreciation	0	53,333	53,333	53,333
EBIT	0	-13,333	-13,333	-13,333
Taxes (35%)
Net income
Depreciation
NOPAT + DEP
CAPEX
NOWC
FCF

Part 1: What is the free cash flow in year 0? Choose the right sign.

Part 2: What is the free cash flow in year 1?

Part 3: What is the free cash flow in year 2?

Part 4: What is the free cash flow in year 3?

Hint: add the recovery of net operating working capital.

Part 5: What is the NPV of this project?