You are considering a cost reduction project for your business. The project will require an investment of $1,250,000 in new equipment. The equipment also has shipping and handling charges of $20,000 and installation cost in your facility of $75,000. The change will require an increase in inventory of $15,000. The equipment falls into the 3-year MACRS class (rates of 33%, 45%, 15%, and 7% in years 1-4, respectively). You expect to operate the new equipment and then shut down operations at the end of year 5. The salvage value and sales price of the equipment at the end of year 5 is $0. The equipment change is not expected to lead to any sales increases but it will reduce a

nnual operational costs by $450,000 in year 1, and in subsequent years cost savings will increase by 2.5% each year. Your business has a 35% tax rate and your WACC is 10%. Determine the time period five cash flow.