a $9.8 million machine. It will cost $54,000 to transport and install the machin
ID: 2805558 • Letter: A
Question
a $9.8 million machine. It will cost $54,000 to transport and install the machine. The machine has a depreciable lifte of five years using incremental revenues of straight-line depreciation and will have no salvage value. The machine will million per year. Daly's associated with the new machine? $4. 1 million per year along with incremental costs of $1.3 marginal tax rate is 35%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows The free cash flow for year O will be Round to the nearest dollar) The free cash flow for years 1-5 will be $(Round to the nearest dollar.)Explanation / Answer
free cash flow at 0
cost of machine
9800000
installation cost
54000
total free cash flow at year 0
9854000
incremental cash from year 1-5
incremental cash flow
4100000
incremental cost
1300000
incremental operating cash flow
2800000
less depreciation
1970800
operating profit
829200
less tax 35%
290220
net incremental income
538980
add depreciation
1970800
free cash flow
2509780
free cash flow at 0
cost of machine
9800000
installation cost
54000
total free cash flow at year 0
9854000
incremental cash from year 1-5
incremental cash flow
4100000
incremental cost
1300000
incremental operating cash flow
2800000
less depreciation
1970800
operating profit
829200
less tax 35%
290220
net incremental income
538980
add depreciation
1970800
free cash flow
2509780
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