The local franchise of Jiffy Lube is thinking of buying a new lift for $90,000 that would make it easier to access the oil filter in customers' cars and save labor. The savings would increase over the project's 3-year life, in line with the projected growth of the business. The machine is to be linearly depreciated to zero and will have no resale value after 3 years.

The appropriate cost of capital for this project is 14%. The company has a tax rate of 21%.

	Year 1	Year 2	Year 3
Cost savings	90,000	99,000	118,800
Depreciation	30,000	30,000	30,000
EBIT	60,000	69,000	88,800
Taxes (21%)
Net income
Depreciation
FCF

Attempt 1/1

Part 1

What is the free cash flow in year 1?

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Part 2

What is the free cash flow in year 2?

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Part 3

What is the free cash flow in year 3?

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Part 4

What is the NPV of this project?

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