Louies Leisure Products is considering a project which will require the purchase of $1.4 million in new equipment. The equipment will be depreciated straight-line to a zero book value over the 7-year life of the project. Louies expects to sell the equipment at the end of the project for 20% of its original cost. The project requires also a net working capital of 0.2 million. The net working capital will be recovered at the end of the project. Operating cash flow from this project is estimated at $1.2 million per year. The firm desires a minimal 10% rate of return on this project. The tax rate is 34%.

i) What is the value of the depreciation each year?

ii) What is the amount of the after-tax salvage value of the equipment?

iii) What is the net present value of the project?