12. You are also considering another project which has a physical life of 3 years; that is, the machinery will be totally worn out after 3 years. However, if the project were terminated prior to the end of 3 years, the machinery would have a positive salvage value. Here are the projects estimated cash flows: Year	Operating Cash Flow	Salvage Value
0	($5,000)	$5,000
1	$2,100	$3,100
2	$2,000	$2,000
3	$1,750	$0

The cost of capital is 10%.

i) What is the project NPV if it is operated for its entire 3 years? Should the project be

accepted?

ii) What would the NPV be if it is operated for 2 years? 1 year?

iii) What is the project optimal (economic) life?

iv) What is the difference between economic and engineered life?