$($Inflation and project cash flows$)$ Carlyle Chemicals is evaluating a new chemical compound used in the manufacture of a wide range of consumer products. The firm is concerned that inflation in the cost of raw materials will have an adverse effect on the project's cash flows. Specifically, the firm expects the cost per unit $($which is currently $$0\mathrm{.}90)$ will rise at a rate of $10$ percent annually over the next three years. The per$-$unit selling price is currently $$0\mathrm{.}99$ and this price is expected to rise at a meager $1$ percent annual rate over the next three years. Carlyle expects to sell $6\mathrm{.}5,7\mathrm{.}2,$ and $9\mathrm{.}5$ million units for the next three years, respectively. Based on this, Carlyle estimated the gross profits in the table below:

The company CFO suggested that they could purchase raw materials in advance for future delivery. This would involve paying for the raw materials today and taking delivery as the materials are needed. Through the advance purchase plan the cost of raw materials would cost $$0\mathrm{.}98$ per unit. How does this new plan affect your cash flow estimates? How should the advance payment for the raw materials enter into your analysis of project cash flows?

The gross profit or $($loss$)$ for year $1$ is $

$($Round to the nearest dollar.$)$

The gross profit or $($loss$)$ for year $2$ is $$.($Round to the nearest dollar.$)$

The gross profit or $($loss$)$ for year $3$ is $$.($Round to the nearest dollar.$)$

How does this new plan affect your cash flow estimates? How should the advance payment for the raw materials enter into your analysis of project cash flows? $($Select the best choice below.$)$