The managers of ABC Inc. plan to manufacture engine blocks for classic cars from the 1960s era. They expect to sell 200 blocks annually for the next five years. The initial investment will cost a total of $800,000 and will be depreciated using the MACRS three-year class. The firm expects to be able to sell the manufacturing equipment for $200,000 at the end of the project. Labour and materials costs total $500 per engine block, fixed costs are $125,000 per year and auto plants will pay $3,000 retail per engine block. Assume a 35% tax rate and a 12% discount rate. What is the cash flow for the project in year 1?

A) $97,500

B) $449,432

C) $337,074

D) $203,996

E) $418,324