Gillian is the CEO of B1NDER, a company in the office supplies business. She is evaluating whether to go ahead with an investment project that involves the production of a new line of binders.

To start production, the company needs to purchase two machines today. Machine AI-83 costs $2 million while Machine AI-96 costs $3 million. According to IRS rules, AI-83 will be depreciated straight line over 4 years while AI-96 will be depreciated straight line over 6 years. B1NDER expects to produce for four years starting immediately and at the end of 4 years both machines will be sold. The salvage value is expected to be $1 million for each of the machines.

The revenues from binder production will be $4.5 million a year while raw material and labor costs will total $3 million a year. The company needs to invest $0.5 million in inventory right now and this amount will be recovered at the end of the project. The opportunity cost of capital is 8% and the prevailing tax rate is 30%. Assume B1NDER has many other profitable products.

What is the after-tax cash flow from selling the machines?