TB12 Inc. is considering a new investment that costs $3 million. The project will provide revenues of $4 million, $2.4 million and $1.6 million in year 1, 2 and 3, respectively. Annual operating expenses account for 50% of annual revenue. The firm uses straight-line depreciation method for the new investment over a three-year project life. This project does not affect working capital and its cost of goods sold can be ignored. The firm has a cost of capital of 12% for the project and the tax rate is 35%. The board awards bonuses to the management based on the annual economic value added.

1. Calculate the project's expected Net Present Value.

2. Calculate the annual economic profits for the project for years 1 to 3 during the project life.

3. If the bonus award is based on economic profits, what would be the potential problem from the shareholders' point of view?

(Detailed work of calculations pls)