You are considering to analyze project that will last for 5 years with the following assumptions: Sales of 50,000 units in year 1 increasing by 50,000 units per year over the life of the project, a year 1 sales price of $260/unit, decreasing by 10% annually and a year 1 cost of $120/unit decreasing by 20% annually. In addition, new tax laws allow you to depreciate the equipment over five years using straight-line depreciation with the residual value of 500,000. In addition, assume that each year 20% of sales comes from customers who would have purchased an existing (old) product for $100/unit and that this product costs $60/unit to manufacture. SG&A will be equal to 2,800,000 each year and this amount include 300,000 utility costs that would be paid even without new project.New equipment will be installed on land that you bought one year ago for 500,000. Installing new equipment will cost 7,500,000. After five years you will sell equipment for 800,000. You will also need working capital in the amount of 2,100,000. Tax rate is 40%.

1. Calculate unlevered net income for this project
2. Calculate Free cash flow