Question
Planet Enterprises is purchasing a $9.6 million machine. It will cost $46 000 to transport and install the machine. The machine has a depreciable life
Planet Enterprises is purchasing a
$9.6
million machine. It will cost
$46 000
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
$1.5
million per year. Planet's marginal tax rate is
30%.
You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new machine?
The free cash flow for year 0 will be?
Use this formula:free cash flows: after-tax earnings+depreciation-capital expenditure-changes in NWC
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Fundamentals Of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
5th Edition
0135811600, 978-0135811603
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