You are evaluating a project for The Dogs, that involves the purchase of a new dog biscuit making machine. The project has a three year life and you estimate the project will increase revenues by $174,000 and will increase costs by $38,000 each year. The project requires an initial investment of $120,000 which is depreciated on a straight-line basis to zero over the 3 year project life. The machine will be sold at the end of the project for $35,000. The initial net working capital investment required for this project is $20,000 which will be recovered at the end of the projects life. The tax rate is 25% and the required return on the project is 10%.

What is the intial cash outflow for this project?

What is the total cash flow for the project in year 3?

What is the annual cash flow associated with the depreciation tax shield for this project?