Better Tires Corp. is planning to buy a new tire making machine for $70,000 that would save it $90,000 per year in production costs. The savings would be constant over the project's 3-year life. The machine is to be linearly depreciated to zero and will have no resale value after 3 years.

The appropriate cost of capital for this project is 13% and the tax rate is 21%.

1. What is the free cash flow in each year of operation (years 1 to 3)?

2. What is the NPV of this project?

Intro Better Tires Corp. is planning to buy a new tire making machine for $70,000 that would save it $90,000 per year in production costs. The savings would be constant over the project's 3-year life. The machine is to be linearly depreciated to zero and will have no resale value after 3 years. The appropriate cost of capital for this project is 13% and the tax rate is 21%. IB Attempt 1/5 for 10 pts. Part 1 What is the free cash flow in each year of operation (years 1 to 3)? 75999.9993 Cost savings Depreciation (70,000/3) EBIT Taxes (21%) Net income Depreciation FCF Years 1, 2 and 3 90,000 - 23,333 = 66,667 - 14,000 = 52,667 + 23,333 = 76,000 Attempt 1/5 for 10 pts. Part 2 What is the NPV of this project? 0+ decimals Submit