(a) What is the incremental free cash flow associated with the new machine at t=0? The free cash flow at t=0 will be $ (Round your answer to the nearest dollar) (b) What is the annual incremental free cash flows each year from t=1 to t=4? The annual free cash flow from t=1 onward will be $ (Round your answer to the nearest dollar)
(a) What is the incremental free cash flow associated with the new machine at t=0? The free cash flow at t=0 will be $ (Round your answer to the nearest dollar) (b) What is the annual incremental free cash flows each year from t=1 to t=4? The annual free cash flow from t=1 onward will be $ (Round your answer to the nearest dollar)
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:For the next two questions, a "+" sign is optional for any answer that is a net cash inflow, but a "-" sign is mandatory for any
answer that is a net cash outflow.
Reebok Ltd is purchasing a $7.7 million machine, which will cost the firm an additional $46,000 to have the
machine transported and installed ready for use. The machine is depreciated to a value of zero over a tax
life of 4 years via the straight-line method. It will also be worthless in the salvage market at this time. The
machine is expected to generate incremental revenues of $4.4 million per year for the firm while also
causing incremental costs of $1.6 million per year. Reebok's marginal tax rate is 37.5%.
You are forecasting incremental free cash flows for Reebok Ltd
(a) What is the incremental free cash flow associated with the new machine at t=0?
The free cash flow at t=0 will be $
(Round your answer to the nearest dollar)
(b) What is the annual incremental free cash flows each year from t=1 to t=4?
The annual free cash flow from t=1 onward will be $
(Round your answer to the nearest dollar)
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