You're evaluating a new electron microscope for the QA (quality assurance) unit. The microscope will cost $24,000 to buy and another $2,000 to install, and will be sold for $1,800 after 3 years. It falls into the 3-year MACRS class, with depreciation rates as follows:

Year	1	2	3	4
Depreciation rate	33%	45%	15%	7%

The microscope will require an inventory of spare parts worth $5,000. The equipment will not increase revenue, but will save the company $12,000 in labor costs each year.

Your company's marginal tax rate (federal plus state) is 34% and its weighted average cost of capital is 10%.

1. What is the free cash flow in year 1?

2. What is the free cash flow in year 2?

3. What is the after-tax salvage value of the equipment at the end of year 3?

4. What is the free cash flow in year 3?

5. What is the NPV of this project?