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Arnold Inc. is considering a proposal to manufacture​ high-end protein bars used as food supplements
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Arnold Inc. is considering a proposal to manufacture​ high-end protein bars used as food supplements by body builders. The project requires use of an existing​warehouse, which the firm acquired three years ago for $3 million and which it currently rents out for $120,000. Rental rates are not expected to change going forward. In addition to using the​ warehouse, the project requires an upfront investment into machines and other equipment of $1.5 million. This investment can be fully depreciated​ straight-line over the next 10 years for tax purposes. ​ 

However, Arnold Inc. expects to terminate the project at the end of eight years and to sell the machines and equipment for $ 559 comma 000 $559,000. ​ Finally, the project requires an initial investment into net working capital equal to 10 percent of predicted​ first-year sales. ​Subsequently, net working capital is 10 percent of the predicted sales over the following year. Sales of protein bars are expected to be $4.9 million in the first year and to stay constant for eight years. Total manufacturing costs and operating expenses​ (excluding depreciation) are 80 percent of​ sales, and profits are taxed at 30 percent.

a. What are the free cash flows of the​ project?

The FCF for year 0 is ​$ −1.990 million.

The FCF for years​ 1-7 is ​$ __________ (round to 3 decimal places) ------- need help answering this million. (Round to three decimal​ places.)

b. If the cost of capital is 15%​, what is the NPV of the​ project?

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