Question

Daily Enterprises is purchasing a million machine. It will cost 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 million per year along with incremental costs of million per year.​ Daily's marginal tax rate is . You are forecasting incremental free cash flows for Daily Enterprises. What are the incremental free cash flows associated with the new​ machine?

Answer 1

Answer:

the numbers are missing, so I looked for a similar question:

the machine's cost is $9,600,000

transportation and installation costs $45,000

incremental revenue per year = $3,900,000

incremental costs per year = $1,100,000

corporate tax rate = 35%

depreciation expense per year = $9,645,000 / 5  = $1,929,000

cash flow year 0 = -$9,600,000 - $45,000 = -$9,645,000

cash flows years 1 to 5 = [(incremental revenue - incremental costs - $depreciation expense) x (1 - tax rate)] + depreciation expense = [($3,900,000 - $1,100,000 - $1,929,000) x 0.65] + $1,929,000 = $2,495,150