Answer and Explanation:
The computation of the free cash flow of the investment for the year 2020 and 2021 is shown below:
Particulars                       Case 1                     Case 2
                               Without Investment      With Investment
Add: Earnings Before 
Interest and 
Tax × (1 - Tax Rate)          $2,000,000          $2,500,000
Add: Non Cash Expenses	$0                     $1,000,000
less: Change in 
(Current Assets 
- Current Liabilities)    ($400,000)         ($650,000)
Less: Capital Expenditure $0                  ($5,000,000)
Free Cash Flows               $1,600,000	($2,150,000)
Working notes:
1. 
Particulars                          Without Investment	With Investment
Revenue for the Year 2021     $6,000,000          $9,000,000
Less: Cost of Goods Sold     $4,000,000           $5,500,000
(-) Depreciation                      $0                                 $1,000,000
Earnings Before 
Interest and Tax                         $2,000,000                $2,500,000
Tax Savings on Depreciation
(Depreciation × 20%)                  $0                               $200,000
2. 
Current Assets               Without Investment          With Investment
Inventories                        $300,000                         $500,000
Accounts Receivable       $200,000                          $300,000
Total                                  $500,000                          $800,000
(Less: Current Liabilities)  
Accounts Payable               $100,000                       $150,000
Less: Change in
 (Current Assets
- Current Liabilities)            $400,000                       $650,000