You are tasked with examining a project for Bore Industries. You know that without the project Bore will generate pre-tax income of $60 million each year in perpetuity. You have forecasted the following financial information of the project. Assuming a marginal tax rate of 25%, which of the following statements is true?

Project Forecasts in $-thousands

	Year
	0	1	2
EBIT	(5,000)	10,000	5,000

	I.	Taking this project will result in additional taxes of $1,250,000 for the firm at time 0. This will decrease the free cash flow of the project at time 0.
	II.	Taking this project will result in tax savings of $1,250,000 for the firm at time 0. This will have no effect on the free cash flow of the project at time 0.
	III.	Taking this project will result in additional taxes of $1,250,000 for the firm at time 0. This will have no effect on the free cash flow of the project at time 0.
	IV.	Taking this project will result in tax savings of $1,250,000 for the firm at time 0. This will increase the free cash flow of the project at time 0.

Note: Answer was not option #2. This is my last attempt so please provide the correct answer.