You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose machine. The machine's basic price is $500,000 and our accountant requires that it be written off over its 5 year class using straight line depreciation to a book value of $0. Purchase of the machine would require an increase in net working capital of $40,000 at t=0 only. The machine would increase the firm's before tax revenues by $960,000 per year but would also increase operating costs by $100,000 per year. It is expected to be used for 3 years and then be sold for $600,000. The firm's marginal tax rate is 40 percent, and the project's cost of capital is 18 percent. (Please show your work)

a) What is the net investment required at t=0?

b) What are the operating cash flows each year?

c) What is the total value of ending (non operating) cash flow in year 3?

d) What is the project's NPV?