1. cuclone industrial is considering a projext with an inital cost of $3.5 million to purchase a piece of equipment, which will be depreciated straight line to a book value of $500,000 over its 5 year life.

-the new equipment will reduce the operating costs by $850,000 per year (this is a pre tax figure)

- there us an initial investment in the net working capital (NWC) of $450,000 which will be maintained at this level until the NWC is recovered in the end

- the equipment can be sold at $600,000 in the end

- the marginal tax rate is 35%

what are the operatkng cash flows over the lifetkme of the equipment?

options:

1 $762,500 per year from year 1-5

2 $797,500 per year from year 1-5

3 $552,500 per year from year 1-5

4 $762,500 per year from year 1 to year 4 and 1,362,500 in year 5

2. by including all the components, what are the incremental free cash flows over the lifetime of the equipment?

options:

1. -$3500000.... $552500 per year....$1602500

2. -$3950000.... $762500 per year... $1812500

3. -$3950000....$797500 per year.... $1812500

4. -$3950000.....$797500 per year.... $1847500

5. -$3950000....$762500 per year..... $1777500