TRUE OR FALSE

Daily Enterprises is purchasing a $10.4million machine. It will cost $49,000to transport and install the machine. The machine has a depreciable life of fiveyears, is usingstraight-line depreciation, and will have no salvage value . The machine will generate incremental revenues of $4.4million per year along with incremental costs of$1.25million per year.Daily's marginal tax rate is 35%. You are forecasting incremental free cash flows for Daily Enterprises. If Daily Enterprises decides to use MACRS instead ofstraight-line depreciation, how would the incremental free cash flows associated with the new machinechange?

"The incremental cash flows would increase in years 0 and1, as the accelerated depreciation schedule would give Daily Enterprises a higher tax shield during those two years. In years 2 through5, the incremental free cash flows would belower, since the depreciation expenses in these years are lower than20%. Overall, the present value of the free cash flows would increase under a MACRS depreciationschedule."

IS THE ABOVE STATEMENT TRUE OR FALSE ^