Reebok Ltd is purchasing a $7.7 million machine, which will cost the firm an additional $46,000...
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Reebok Ltd is purchasing a $7.7 million machine, which will cost the firm an additional $46,000 to have the machine transported and installed ready for use. The machine is depreciated to a value of zero over a tax life of 4 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 $4.4 million per year for the firm while also causing incremental costs of $1.6 million per year. Reebok's marginal tax rate is 37.5%. 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=4? The annual free cash flow from t=1 onward will be $ (Round your answer to the nearest dollar) Reebok Ltd is purchasing a $7.7 million machine, which will cost the firm an additional $46,000 to have the machine transported and installed ready for use. The machine is depreciated to a value of zero over a tax life of 4 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 $4.4 million per year for the firm while also causing incremental costs of $1.6 million per year. Reebok's marginal tax rate is 37.5%. 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=4? The annual free cash flow from t=1 onward will be $ (Round your answer to the nearest dollar)
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Related Book For
Intermediate Accounting
ISBN: 978-0324312140
16th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
Posted Date:
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