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Intro The local franchise of Jiffy Lube is thinking of buying a new lift for $60,000 that would make it easier to access the oil filter in customers' cars and save labor. The savings would increase over the project's 3-year life, in line with the projected growth of the business: 0+ decimals Part 1 What is the free cash flow in year 3? Submit Part 2 What is the NPV? A 0+ decimals The machine is to be linearly depreciated to zero and will have no resale value after 3 years. The company uses a discount rate of 11% and has a tax rate of 21%. Submit B C D 1 Year 1 2 2 Cost savings 20,000 22,000 26,400 3 BAttempt 1/5 for 10 pts. B Attempt 1/5 for 10 pts. Intro Due to high demand for wood, San Lorenzo Lumber is considering buying a new timber cutting machine to add to its existing stock. The machine will cost $360,000 to purchase and $20,000 for shipping and installation. Last year, the firm cleared an unused area in its timber mill to make space for the machine, at a cost of $8,000. The new cutting machine will allow the company to sell an additional 140,000 pieces of wood per year, at a price of $6 per piece. Variable costs, including timber, electricity and labor, are expected to add up to 60% of sales. To make best use of the new machine, the company will need to increase its inventory of timber logs by $25,000. Since the firm uses trade credit when purchasing raw timber, accounts payable will increase by $12,000. The cutting machine is expected to last 4 years and will then be sold for $35,000. It falls into the 3-year MACRS class, with depreciation rates as follows: The firm has a marginal tax rate (federal and state) of 34%. Year 1 2 3 4 Depreciation rate 33% 45% 15% 7% B Attempt 1/5 for 10 pts. Part 1 What is the initial (year-0) free cash flow from the project? Choose the right sign. 0+ decimals Submit Part 2 What is the free cash flow in year 1? 0+ decimals Submit Part 3 What is the free cash flow in year 2? 0+ decimals Submit Part 4 What is the free cash flow in year 3? 0+ decimals Submit B Attempt B Attempt BAttempt 1/5