Question

Daily Enterprises is purchasing a

$ 10.3 million machine. It will cost $53,000 to transport and install the machine. The machine has a depreciable life of five years using​ straight-line depreciation and will have no salvage value. The machine will generate incremental revenues of $4.2 million per year along with incremental costs of $1.3 million per year.​ Daily's marginal tax rate is 35%.

You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new​ machine?

The free cash flow for year 0 will be?

calculate after tax earnings or years 1-5 using: after tax earnings - (revenues - costs - depreciation) x (1-tax rate)

Answer 1