SteelTech needs to replace its current manufacturing equipment to be more efficient. The current equipment, a MAC-98, can be sold today for $1,000,000 net.A brand-new MAC-100 (newer model) retails for almost $3,250,000; however, Christine believes she can purchase it for $3,000,000 today.She will fund this purchase in part with proceeds from the sale of the MAC-98.In addition, accounts payable are expected to increase by $1,500,000 today, and fully reverse in year 4.

The new equipment will be in operation beginning in year two.As the old equipment will be offline in year 1, Christine forecasts lost revenues of $550,000 in year 1 arising from the idled equipment.The cost savings in years 2, 3 and 4 are estimated at $600,000, $950,000, and $1,000,000, respectively.SteelTech's cost of capital and tax-rate remain unchanged. The equipment is depreciated using straight line depreciation (i.e., Equipment Cost - Salvage Value) / Useful Life).

What is the initial cash outlay for this project (i.e., year 0 cash flows)?