Question:

Mersey Chemicals manufactures polypropylene that it ships to its customers via tank car. Currently it plans to add two additional tank cars to its fleet four years from now.However, a proposed plant expansion will requireMersey's transport division to add these two additional tank cars in 2

2 years' time rather than in 4 years. The current cost of a tank car is $ 1.9

$1.9 million, and this cost is expected to remain constant.Also, while tank cars will lastindefinitely, they will be depreciatedstraight-line over afive-year life for tax purposes. SupposeMersey's tax rate is 37 %

37%. When evaluating the proposedexpansion, what incremental free cash flows should be included to account for the need to accelerate the purchase of the tankcars?

Answer:

Why the answer as follows? Can you list the calculation steps? Thank you for your help.

Incremental FCF for year 0 is $

0.00

Incremental FCF for year 1 is $

0

0 million. (Round to two decimal places and outflows as negativevalues.)

Incremental FCF for year 2 is $

negative 3.80million (Round to two decimal places and outflows as negativevalues.)

Incremental FCF for year 3 is $

0.28 million. (Round to two decimal places and outflows as negativevalues.)

Incremental FCF for year 4 is $

4.08 million. (Round to two decimal places and outflows as negativevalues.)

Incremental FCF for year 5 is $

0.00 million. (Round to two decimal places and outflows as negativevalues.)

Incremental FCF for year 6 is $

0.00 million. (Round to two decimal places and outflows as negativevalues.)

Incremental FCF for year 7 is $

0 million. (Round to two decimal places and outflows as negativevalues.)

Incremental FCF for year 8 is $

0.28 million. (Round to two decimal places and outflows as negativevalues.)

Incremental FCF for year 9 is $

0.28 million. (Round to two decimal places and outflows as negativevalues.)