1). You are considering a cost reduction project for your business. The project will require an investment of $1,250,000 in new equipment. The equipment also has shipping and handling charges of $20,000 and installation cost in your facility of $75,000. The change will require an increase in inventory of $15,000. The equipment falls into the 3-year MACRS class (rates of 33%, 45%, 15%, and 7% in years 1-4, respectively). You expect to operate the new equipment and then shut down operations at the end of year 5. The salvage value of the equipment at the end of year 5 is expected to be $150,000. The equipment change is not expected to lead to any sales increases but it will reduce annual operational costs by $450,000 in year 1, and in subsequent years cost savings will increase by 2.5% each year. Your business has a 35% tax rate and your WACC is 10%. Determine the time period five cash flow.