Use the following information for the next four questions:

Gibson Guitars is considering expanding one of its production facilities to build a new line of guitars honoring legendary guitarist Les Paul. The project would require a $6,000,000 capital investment and will be depreciated (straight-line to zero) over its 3 year life.

Sales are expected to be $8,000,000 annually for the 3 year period with costs (excluding depreciation) at 30% of sales. The company would also have to commit initial working capital to the project of $1,000,000. The company has a 35% tax rate.

Project cash flow (Free Cash Flow) for Year 0 is:

		$9,000,000
		-$9,000,000
		-$7,000,000
		-$7,300,000
		-$1,000,000

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Project cash flow (Free Cash Flow) for Year 1 is:

		$5,800,000
		$4,756,000
		$2,800,000
		$3,800,000
		$4,340,000

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1. Project cash flow (Free Cash Flow) for Year 2 is:

   		$5,800,000
   		$4,756,000
   		$2,800,000
   		$3,800,000
   		$4,340,000

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Project cash flow (Free Cash Flow) for Year 3 is:

		$5,340,000
		$5,756,000
		$2,800,000
		$3,800,000
		$6,056,000