three years ago for $$1$ million and which it currently rents out for $$122,000.$ Rental rates are not expected to change going forward. In addition to using the warehouse, the project requires an upfront

investment into machines and other equipment of $$1\mathrm{.}4$ million. This investment can be fully depreciated straight$-$line over the next $10$ years for tax purposes. However, Arnold Inc. expects to

terminate the project at the end of eight years and to sell the machines and equipment for $$480,000.$ Finally, the project requires an initial investment into net working capital equal to $10\%$ of

predicted first$-$year sales. Subsequently, net working capital is $10\%$ of the predicted sales over the following year. Sales of protein bars are expected to be $$4\mathrm{.}6$ million in the first year and to stay

constant for eight years. Total manufacturing costs and operating expenses $($excluding depreciation$)$ are $80\%$ of sales, and profits are taxed at $30\%.$

a$.$ What are the free cash flows of the project?

b$.$ If the cost of capital is $15\%,$ what is the NPV of the project?

a$.$ What are the free cash flows of the project?

The FCF for year $0$ is $$,$ million. $($Round to three decimal places.$)$

The FCF for years $1-7$ is $$\mathrm{.}601$ million. $($Round to three decimal places.$)$

The FCF for year $8$ is $$1\mathrm{.}481$ million. $($Round to three decimal places.$)$

b$.$ If the cost of capital is $15\%,$ what is the NPV of the project?

The NPV of the project is $ million. $($Round to three decimal places.$)$