Question
Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $ 6 comma 000 comma 000 to
Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $ 6 comma 000 comma 000 to buy the machine and $ 15 comma 000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $ 4 comma 000 comma 000 per year, starting at the end of the first year, with associated costs of $1 million for each of those years. The machine is expected to have a working life of seven years and will be depreciated over those seven years. The marginal tax rate is 40%. What are the incremental free cash flows associated with the new machine in year 2? A. $ 2 comma 140 comma 714 B. $ 2 comma 143 comma 714 C. $ 855 comma 000 D. $ 859 comma 286
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