Question
Daily Enterprises is purchasing a $9.6 million machine. It will cost $51,000 to transport and install the machine. The machine has a depreciable life of
Daily Enterprises is purchasing a $9.6 million machine. It will cost $51,000 to transport and install the machine. The machine has a depreciable life of five years using straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.3 million per year along with incremental costs of$1.4 million per year. Daily's marginal tax rate is 21%. You are forecasting incremental free cash flows for Daily Enterprises.
What are the incremental free cash flows associated with the new machine?
What will the free cash flow for year 0 be?
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