Question: For the next two questions, a +' sign is optional for any answer that is a net cash inflow, but a - sign is mandatory

For the next two questions, a "+' sign is optional for any answer that is a net cash inflow, but a "-" sign is mandatory for any answer that is a net cash outflow. Reebok Ltd is purchasing a $7.9 million machine, which will cost the firm an additional $49,000 to have the machine transported and installed ready for use. The machine is depreciated to a value of zero over a tax life of 8 years via the straight-line method. It will also be worthless in the salvage market at this time. The machine is expected to generate incremental revenues of $4.3 million per year for the firm while also causing incremental costs of $1.9 million per year. ReeboKs marginal tax rate is 30.0%. You are forecasting incremental free cash flows for Reebok Ltd (a) What is the incremental free cash flow associated with the new machine at t=0 ? The free cash flow at t=0 will be $ (Round your answer to the nearest dollar) (b) What is the annual incremental free cash flows each year from t=1 to t=8 ? The annual free cash flow from t=1 onward will be $ (Round your answer to the nearest dollar)
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
