Question #19 - #20 will use the following setup. Cyclone Industrial is considering a project with an initial cost of $3.5 million to purchase a piece of equipment, which will be depreciated straight-line to a book value of $500,000 over its 5-year life. The new equipment will reduce the operating costs by $850,000 per year (This is a pre-tax figure.) There is an initial investment in the net working capital (NWC) of $450,000 which will be maintained at this level until the NWC is recovered in the end. The equipment can be sold at $600,000 in the end. The marginal tax rate is 35%. What are the operating cash flows (OCF) over the lifetime of the equipment? $762.500 per year from year 1 to year 4 and 1,362,500 in year 5 5762,500 per year from year 1 to year 5 $797,500 per year from year 1 to year 5 $552.500 per year from year 1 to year 5 20. Following #19 By including all the components, what are the incremental free cash flows (FCFS) over the lifetime of the equipment? Year 1 ... 4 5 2 ? -$3.500.0005552.500 per year. 51,602,500 -$3,950,000 ... 5797,500 per year.. $1,812,500 -$3.950.000 $762.500 per year $1.812.500 -$3.950,000... $797.500 per year $1,847,500 -$3.950,000 ... 5762.500 per year $1.777.500