Question $10$

$1$ pts

General Motors has approved a project $15$ years ago and the project still has $20$ years of remaining life today. The management replaced the old equipment with a new equipment today. The old equipment was purchased $15$ years ago at a cost of $$30$ million and was assumed to have no value at the end of its $35-$year life. The new equipment costs $$45$ million and is assumed to have no value at the end of the project. The firm uses straight$-$line depreciation. The new equipment decreases Operating Expenses by $$5$ million per year, since the new equipment is energy$-$efficient. The marginal tax rate is $40\%.$ If the firm replaces the old equipment now, free cash flows for the next year will

decrease by $$3\mathrm{.}20$ million

increase by $$3\mathrm{.}38$ million

increase by $$3\mathrm{.}56$ million

increase by $$3\mathrm{.}92$ million

decrease by $$3\mathrm{.}70$ million