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 projects estimated cash flows:

Year	CF	Salvage
0	($185,000)	$185,000
1	76,275	110,000
2	95,800	65,000
3	102,000	0

Using the 8% cost of capital, what is the projects 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 projects optimal (economic) life?