HW3.dvi

Daily Enterprises is purchasing a $10 million machine. It will cost $50,000 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 million per year along with incremental costs of $1.2 million per year. Dailys marginal tax rate is 35%. You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine?

a) The free cash flow for year 0? (Round to the nearest dollar.) PLEASE SHOW WORK STEP BY STEP

HW3.dvi

b) The free cash flow for years 1-5? (Round to the nearest dollar.)PLEASE SHOW WORK STEP BY STEP