Question: A company is adding an additional machine to increase its operating capacity. As utilization of the new machine ramps up, the company will see changes

A company is adding an additional machine to increase its operating capacity. As utilization of the new machine ramps up, the company will see changes in revenues, operating costs, taxes, accounts receivable, inventories, accounts payable and other elements of net working capital. For a particular year, changes are detailed below: Revenue will be $25,000 Cash operating expenses will be $20,000 Depreciation expense caused by the new machine will be $1,500 Accounts receivable will increase by $1,000 Inventory will increase $1,200 Accounts payable will increase $900 Accrued expenses will increase $200 The effective tax rate is 25% What will be the effect on free cash flow for the year in question? Assume the only investment in fixed assets will be the initial investment, so this will not affect annual free cash flows. No other factors change

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