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A machine was purchased 2 years ago for $4M. It could be sold today for $2M and its expected salvage value in three years is
A machine was purchased 2 years ago for $4M. It could be sold today for $2M and its expected salvage value in three years is $0.5M. Machine is in Class 43 with a 30% depreciation rate. It costs $3M. The new machine will be sold for $1.5M at the end of 3 years. The new machine will increase EBITDA by $800,000 per year. The companys tax rate is 40% and its cost of capital is 12%. What is the free cash flow in the terminal year (three years after replacement)? (Round your answer to the nearest dollar.)
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