Racin’ Scooters is introducing a new product and has an expected change in EBIT of $475,000. Racin’ Scooters has a 21 percent marginal tax rate. Bonus depreciation will be $250,000 in year 1. In addition, the project will cause the following changes in year 1:

What is the project’s free cash flow in year 1?

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WITHOUT THE PROJECT WITH THE PROJECT Accounts receivable $45,000 $63,000 Inventory 65,000 80,000 Accounts payable 70,000 94,000