You are also considering another project which has a physical life of 3 years; that is, the machinery will be totally worn out after 3 years.However, if the project were terminated prior to the end of 3 years, the machinery would have a positive salvage value.Here are the project's estimated cash flows:

Yr

CF

Salvage

0

($85,000)

$85,000

1

42,500

48,000

2

55,100

19,000

3

57,000

0

Using the 9% cost of capital, what is the project's NPV if it is operated for the full 3 years?Would the NPV change if the company planned to terminate the project at the end of Year 2?At the end of Year 1?What is the project's optimal (economic) life?