The Campbell Company is evaluating the acquisition of a new food machine. The base price of the equipment is $108,000 and it would cost another $12,500 for shipping and installation.  The Campbell Company also paid $10,000 to an engineering firm to determine the feasibility of the new food machine. The machine falls in the MACRS 3 year class and would be sold after 4 years for $25,000. The new food line would require an increase in inventory of $5,500, which would be recovered at the end of the project.  The machine is expected to generate an extra $44,000 per year in revenues, but have no effect on operating costs.  Campbell's WACC is 10% and its marginal tax rate is 34%.

MACRS 3 year class Depreciation Schedule: Year 1, 33.3%; Year 2, 44.5%; Year 3, 14.8%; Year 4, 7.4%

A)   What is the project's initial expense (Year 0 Cash Flow)?

B)   What is the project's Operating Cash Flow (OCF) in Year 2? 

C)   What is the project's Free Cash Flow (or Cash Flow from the Assets) in Year 3?

D)   What is the project's NPV?