Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $6,000,000 to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost a additional $3 million. The machine is expected to raise gross profits by $3,500,000 p year, starting at the end of the first year, with associated costs of $1 million for each c those years. The machine is expected to have a working life of six years and will be depreciated over those six years. The marginal tax rate is 40%. What are the incremental free cash flows associated with the new machine in year 2?
Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $6,000,000 to buy the machine and $10,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost a additional $3 million. The machine is expected to raise gross profits by $3,500,000 p year, starting at the end of the first year, with associated costs of $1 million for each c those years. The machine is expected to have a working life of six years and will be depreciated over those six years. The marginal tax rate is 40%. What are the incremental free cash flows associated with the new machine in year 2?
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:Cameron Industries is purchasing a new chemical vapor depositor in order to make
silicon chips. It will cost $6,000,000 to buy the machine and $10,000 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 $3,500,000 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 six years and will be
depreciated over those six years. The marginal tax rate is 40%. What are the
incremental free cash flows associated with the new machine in year 2?
...
O A. $1,900,667
O B. $1,001,667
O C. $998,333
O D. $1,498,333
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