CathFoods will release a new range of candies which contain antioxidants. New equipment to manufacture the candy will cost

$2

million, which will be depreciated by straight-line depreciation over

six

years. In addition, there will be $5 million spent on promoting the new candy line in the first year. It is expected that the range of candies will bring in revenues of

$4

million per year for

six

years with production and support costs of $1.5 million per year. If CathFood's marginal tax rate is 35%, what are the incremental free cash flows in the second year of this project?

Question content area bottom

Part 1

A.

$0.758

million

B.

$1.742

million

C.

$2.167

million

D.

$1.400

million