Magnolia Acoustics, Inc. (MAI), projects unit sales for a new seven-octave voice emulation implant as follows:

Year Unit Sales

0 - 0

1 - 83,000

2 - 92,000

3 - 104,000

4 - 98,000

5 - 84,000

Production of the implants will require an investment of $1,500,000 in net working capital to start the project.

Additional net working capital investments each year (starting in year 1) equal to 15% of the projected sales increase for the following year. Decreases in sales will result in recovery of net working capital to equal 15% of the projected sales decrease for the following year.

All net working capital investments will be recovered after the final year of the project.

Total fixed costs are $2,400,000 per year, variable production costs are $190 per unit, and the units are priced at $345 each.

The equipment needed to begin production has an installed cost of $23,000,000. This equipment is considered industrial machinery and thus qualifies as seven-year MACRS property.

MACRS for 7 years Yr - %

1 - 14.29%

2- 24.49%

3- 17.49%

4- 12.49%

5- 8.93%

6 - 8.92%

7- 8.93%

8- 4.46%

In five years, this equipment will be sold for an estimated 20% of its acquisition cost.

MAI is in the 35% marginal tax bracket and has a required return on all its projects of 18%.

Based on these preliminary project estimates, what is the NPV of the project? What is the Project Free Cash Flow?