Use the following information to answer questions 1-3.

Mitts Beverage Inc. manufactures and distributes fruit juice products. Mitts is considering the development of a new prune juice product. Mitts CFO has collected the following information regarding the proposed project:

The company already owns a section of land where the facility could be built. The land is estimated to have a after tax market value of $1 million. The company plans to sell the land if it is not used for this project.

The project will require that the company spend $1 million today (t = 0) to purchase a new machine. For tax purposes, the equipment will be depreciated on a straight-line basis. The company plans to use the machine for all 3 years of the project. At t = 3, the equipment is expected to have no salvage value.

The project will require a $400,000 increase in inventory and $200,000 increase in accounts payable at t = 0. The cost of the net operating working capital will be fully recovered at t = 3.

The project's incremental sales are expected to be $1 million a year for three years (t = 1, 2, and 3).

The projects annual operating costs (excluding depreciation) are expected to be 60% of sales.

The companys tax rate is 40%.

The companys interest expense each year will be $300,000.

The projects discount rate is 10%.

1. What is the initial investment for the project?

2. What is the annual expected incremental operating cash flow for years 1-3?

3. What is the projects NPV?