Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $7,000,000 to buy the machine and $15,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $4,000,000 per year, starting at the end of the first year, with associated costs of $1 million for each of those years. The machine is expected to have a working life of five years and will be depreciated over those five years. The marginal tax-rate is 20%. What are the incremental free cash flows associated with the new machine in year 2? OA. $1,597,000 OB. $1,403,000 O C. $1,397,000 O D. $2,680,600
Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $7,000,000 to buy the machine and $15,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $4,000,000 per year, starting at the end of the first year, with associated costs of $1 million for each of those years. The machine is expected to have a working life of five years and will be depreciated over those five years. The marginal tax-rate is 20%. What are the incremental free cash flows associated with the new machine in year 2? OA. $1,597,000 OB. $1,403,000 O C. $1,397,000 O D. $2,680,600
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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