Due to high demand for wood, San Lorenzo Lumber is considering buying a new timber cutting machine to add to its existing stock.

• The machine will cost $370,000 to purchase and $20,000 for shipping and installation. Last year, the firm cleared an unused area in its timber mill to make space for the machine, at a cost of $8,000.
• The new cutting machine will allow the company to sell an additional 140,000 pieces of wood per year, at a price of $4 per piece. Variable costs, including timber, electricity and labor, are expected to add up to 60% of sales.
• To make best use of the new machine, the company will need to increase its inventory of timber logs by $25,000. Since the firm uses trade credit when purchasing raw timber, accounts payable will increase by $12,000.
• The cutting machine is expected to last 4 years and will then be sold for $35,000. It falls into the 3-year MACRS class, with depreciation rates as follows:

  Year	1	2	3	4
  Depreciation rate	33%	45%	15%	7%

The firm has a marginal tax rate (federal and state) of 34%.

What is the initial (year-0) free cash flow from the project? Choose the right sign.

What is the free cash flow in year 1?

What is the free cash flow in year 2?

What is the free cash flow in year 3?