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Veridian Dynamics is considering the purchase of a new cloning machine, which will cost $120 million plus an additional $12 million to ship and install.

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Veridian Dynamics is considering the purchase of a new cloning machine, which will cost $120 million plus an additional $12 million to ship and install. The new machine will replace the existing machine, which has zero book value and could be sold today for $20 million. The new machine has a useful life of 4 years, and will be depreciated to zero using the straight line method. The new machine will require $5 million worth of spare parts to be purchased initially and held in Inventory for the next 4 years to make sure the machine operates smoothly. These spare parts will be sold at the end of 4 years and the entire $5 million will be recaptured. The new machine will increase sales by $120 million per year, increase cost of goods sold by $60 million per year, and decrease operating expenses by $8 million pear year over the next 4 years. Veridian Dynamics expects to sell the new machine for $60 million at the end of 4 years. Veridian Dynamics's income tax rate is 20% and its cost of capital is 20%. What is the Annual Free Cash Flow for years through 4? (in 5 millions) Select one: O a $28 O b. $35 O c. $120 O d. 561

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