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Daily Enterprises is purchasing a $12 million machine. It will cost $150,000 to transport and...

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Finance

Daily Enterprises is purchasing a $12 million machine. It will cost $150,000 to transport and install the machine.
The machine has a depreciable life of three years using straight-line depreciation and will have zero salvage book value.
However, Daily expects to be able to re-sell the machine for 4 million at the end of yar 3. The machine will generate
incremental revenues of $8 million per year along with incremental COGS of $3.2 million per year for the next three years, at
which point Daily plans to dispose of it. Accounts receivable are expected to be 10% of sales, while accounts payable are
expected to be 10% of sales until the beginning of year 3, while by the end of year 3 the increase in those accounts will be fully
liquidated. Daily's marginal tax rate is 25%. You are forecasting incremental free cash flows for the purchase of this new
machine by Daily Enterprises. What are the incremental free cash flows associated with the new machine?
at time 0?

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