Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.45 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $1,795,000 in annual sales, with costs of $688,000. The project requires an initial investment in net working capital of $420,000, and the fixed asset will have a market value of $435,000 at the end of the project.

a) If the tax rate is 22 percent, what is the projects Year 0 net cash flow? Year 1? Year 2? Year 3?

b) If the required return is 9 percent, what is the project's NPV?