ABC Co. is evaluating a new project by discounting the expected cash flows using its WACC. The following information is known about the project

ABC Co. is evaluating a new project by discounting the expected cash flows using its WACC. The following information is known about the project:

Two years ago, the company paid $1,750,000 for the land and building that will house the project. The property could be sold for $4,500,000 today. Its book value is the purchase price.
One year ago, the firm spent $125,000 on initial marketing for the project.
The project requires the purchase of equipment (in year 0) for $850,000.
The firm will pay $225,000 in interest expense to finance the project.
The machine will be fully depreciated straight-line in years 1-6.
The project will generate sales of $900,000 per year and expenses of $225,000 per year for years 1-6.
In year 1, the firm must increase its inventory by $120,000. It will maintain the new level of inventory through year 6.

The tax rate is 30%.

Choose the answer below that equals the Year 1 cash flow:

$(850,000)
$(4,525,000)
$635,000
$(4,275,000)
$253,333
$395,000
$307,500

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