Your company has been doingwell, reaching $ 1million inearnings, and is considering launching a new product. Designing the new product has already cost $500,000. The company estimates that it will sell 800,000 units per year for $3.00 per unit and variablenon-labor costs will be $1.00 per unit. Production will end after year 3. New equipment costing $1 million will be required. The equipment will be depreciated to zero using the7-year MACRS schedule. You plan to sell the equipment for book value at the end of year 3. Your current level of working capital is $300,000. The new product will require the working capital to increase to a level of $380,000 immediately, then to $400,000 in year1, $350,000 in year2, and finally return to $300,000. Your tax rate is 35%. The discount rate for this project is 10%. Do the capital budgeting analysis for this project and calculate its NPV.

Note: Assume that the equipment is put into use in year 1.

Complete the capital budgeting analysis (format below) for Year 0, 1, 2, 3 for this project:(Round to the nearestdollar.)

Sales Cost of Goods Sold Gross Profit Depreciation EBIT Tax Incremental Earnings + Depreciation Incremental Working Capital Capital Investment Incremental Free Cash Flow