You are evaluating a product for your company. You estimate the sales price of product to be $120 per unit and sales volume to be 10,200 units in year 1; 25,200 units in year 2; and 5,200 units in year 3. The project has a 3 year life. Variable costs amount to $45 per unit and fixed costs are $202,000 per year. The project requires an initial investment of $330,000 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 $42,000. NWC requirements at the beginning of each year will be approximately 17% of the projected sales during the coming year. The tax rate is 21% and the required return on the project is 10%. What will the year 2 free cash flow for this project be?

Multiple Choice

A) $1,246,620

B) $1,578,000

C) $948,620

D) $1,356,620