Shoreys Vast Pragmatic Solutions, Inc. is considering the acquisition of some new equipment with an expected economic life of 3 years. The cost of the equipment including delivery and installation is $800,000. The equipment is considered a MACRS 3-year class asset (use 33%, 45%, 15% and 7% respectively for years 1, 2, 3 & 4 for depreciation). After 3 years, this equipment is expected to be salvaged and sold for $100,000. Use of this new equipment would require an increase in net working capital of $50,000 immediately. Assume the increase in net working capital will be returned to the firm at the end of the project life.

This project is expected to increase revenues by $450,000 annually and increase operating costs by $150,000 annually. Shoreys marginal tax rate is 25%. Assume Shorey has sufficient taxable income to use all available tax deductions.

What is the net operating cash flow in Year 1?

What is the net operating cash flow in Year 2?

What is the net operating cash flow in Year 3?