Question 3 0 10 pts A firm is considering the purchase of a machine which would

Question

Question 3 0 10 pts A firm is considering the purchase of a machine which would represent an investment of $36 million, and would be depreciated in a straightline basis over 3 years. Sales are expected to be $10 million per year, and operating costs 22% of sales. The company is currently paying $4 million in interest per year, has a tax rate of 40%, and a WACC of 10%. what is the company's free cash flow for year 1 of this project? Enter your answer in millions of dollars, rounded to 1 decimal, and without the dollar sign. For example, if your answer is 10.5678, enter 10.6. Use the minus sign () if cash flow is negative. You Answered Correct Answer9.5 margin of error +/-0.1

Explanation / Answer

Sales $ 10.0 Less: Costs $    2.2 10*22% Depreciation $ 12.0 EBIT $   (4.2) Less: Tax payable @ 40% $   (1.7) Net income $   (2.5) Add: Depreciation $ 12.0 Free cash flows $    9.5

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