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The local franchise of Jiffy Lube is thinking of buying a new lift for $70,000 that...

The local franchise of Jiffy Lube is thinking of buying a new lift for $70,000 that would make it easier to access the oil filter in customers' cars and save labor. The savings would increase over the project's 3-year life, in line with the projected growth of the business:

A B C D
1 Year 1 2 3
2 Cost savings 60,000 66,000 79,200

The machine is to be linearly depreciated to zero and will have no resale value after 3 years. The company uses a discount rate of 16% and has a tax rate of 21%.

What is the free cash flow in year 3?

What is the NPV?

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