You are evaluating a product for your company. You estimate the sales price of product to be $200 per unit and sales volume to be 11,000 units in year 1; 26,000 units in year 2; and 6,000 units in year 3. The project has a 3 year life. Variable costs amount to $125 per unit and fixed costs are $210,000 per year. The project requires an initial investment of $354,000 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 $50,000. NWC requirements at the beginning of each year will be approximately 15% of the projected sales during the coming year. The tax rate is 21% and the required return on the project is 12%. What will the year 2 free cash flow for this project be?

Multiple Choice

$1,399,380

$1,622,000

$799,380

$1,281,380