You start a new 3 year bicycle manufacturing project using an initial investment of $450,000 to buy new equipment. Prior to launching your business, you paid $25,000 to a consultant who helped you put together a business proposal. Your business is able to sell 1,000 bicycles per year for a selling price of $2,500, variable cost of $1,200 per bicycle, and fixed costs per year of $350,000. Assume you depreciate your equipment straight-line over a 3 year period, anticipate inventory to go up $500 at year 0 (with full recovery at the end of the project), and have a corporate tax rate of 20.0%, all capital expenditure is spent at year 0 and you have a WACC of 8.8%. (Use spreadsheet to solve this problem)

What is the total cash outflow during year 0 -450500,-400000,-50000,-450000

Free cash flow of project during year 1 790,000, 700,000, 650,000, 810,000

NPV of the project 1,3 mil, 2,1 mil, 1,6 mil, 2 million