Suppose DuPont is considering an investment that would extend the life of one of its chemical facilities for four years. The project would require upfront costs of $6.67 million plus a $24 million investment in equipment. The equipment will be obsolete in 4 years and will be depreciated via straight-line over that period. During the next four years, however, DuPont expects annual sales of $60 million per year from this facility. Material costs and operating expenses are expected to total $25 million and $9 million, respectively, per year. DuPont expects no net working capital requirements for the project, and it pays a tax rate of 35%.

Year 0 1 2 3 4 5 6 Incremental EF Sales Cost of Goods Gross Profit Operat. Expense Depreciation EBIT Income Taxes Unlevered NI Plus: Depreciation Less: Capital Expenses INCREMENTAL FCF