Find the cash flow from assets (CFFA) of the following project.
|Project life||2 years|
|Initial investment in equipment||$6m|
|Depreciation of equipment per year for tax purposes||$1m|
|Unit sales per year||4m|
|Sale price per unit||$8|
|Variable cost per unit||$3|
|Fixed costs per year, paid at the end of each year||$1.5m|
Note 1: The equipment will have a book value of $4m at the end of the project for tax purposes. However, the equipment is expected to fetch $0.9 million when it is sold at t=2.
Note 2: Due to the project, the firm will have to purchase $0.8m of inventory initially, which it will sell at t=1. The firm will buy another $0.8m at t=1 and sell it all again at t=2 with zero inventory left. The project will have no effect on the firm's current liabilities.
Find the project's CFFA at time zero, one and two. Answers are given in millions of dollars ($m).