Dream High is purchasing a new machinery to make dream houses. It will cost $2,000,000...
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Dream High is purchasing a new machinery to make dream houses. It will cost $2,000,000 to buy the machine and $20,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $2 million. The machine is expected to raise gross profits of $1,500,000 per year, starting at the end of the first year, with the costs of $0.5 million for each of those years. The machine is expected to have a working life of 10 years and will be depreciated using straight line method over those ten years. The marginal tax rate is 35%. What are the incremental free cash flows associated with the new machine in year 3 ? Multiple Choice $575.000 $720.700. $1,500,000. $2,020,000
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