You are evaluating a product for your company. You estimate the sales price of product to be $260 per unit and sales volume to be 11,600 units in year 1; 26,600 units in year 2; and 6,600 units in year 3. The project has a 3 year life. Variable costs amount to $185 per unit and fixed costs are $216,000 per year. The project requires an initial investment of $372,000 in assets which will be depreciated straight-line to zero over the 3 year project life. The actual market value of these assets at the end of year 3 is expected to be $56,000. NWC requirements at the beginning of each year will be approximately 16% of the projected sales during the coming year. The tax rate is 34% and the required return on the project is 11%. What will the year 2 cash flows for this project be?

$1,092,300

$1,216,300

$592,300

$1,655,000

My answer so far:

I got sale will go from 3,016,000 to 6,916,000 between years 1 and 2, but I don't know how to calculate how NWC will increase. Can yo give me the detail on how to compute so that I can use it for future problems, please?