Question

Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $ 6 comma 000 comma 000$6,000,000 to buy the machine and $ 20 comma 000$20,000 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 comma 500 comma 000$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 sixsix years and will be depreciated over those sixsix years. The marginal tax rate is​ 40%. What are the incremental free cash flows associated with the new machine in year​ 2? A. $ 996 comma 667$996,667 B. $ 1 comma 901 comma 333$1,901,333 C. $ 1 comma 496 comma 667$1,496,667 D. $ 1 comma 003 comma 333

Answer 1

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