DeLuxe Furniture is thinking of buying a wood cutting machine for $190,000 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 working capital. The appropriate cost of capital for this project is 13% 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	63,333	63,333	63,333
EBIT	0	-23,333	-23,333	-23,333
Taxes (35%)
Net income
Depreciation
CF
NCS
NWC
CF

Part 1

What is the cash flow in year 0? Choose the right sign.

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Attempt 1/20 for 10 pts.

Part 2

What is the cash flow in year 1?

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Attempt 1/20 for 10 pts.

Part 3

What is the cash flow in year 2?

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Attempt 1/20 for 10 pts.

Part 4

What is the cash flow in year 3?

Hint: add the recovery of net working capital.

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Attempt 1/20 for 10 pts.

Part 5

What is the NPV of this project?

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