Racin' Scooters is introducing a new product and has an expected change in EBIT of

$475,000.

Racin' Scooters has a

31

percent marginal tax rate. The project will produce

$80,000

of depreciation per year. In addition, the project will cause the following changes in year 1:

WITHOUT THE PROJECT		WITH THE PROJECT
Accounts receivable	$40,000		$68,000
Inventory	60,000		80,000
Accounts payable	79,000		92,000

.

What is the project's free cash flow in year 1?