Chemical vapor depositor in order to make silicon chips

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Reference no: EM132010930

1. Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $ 5 million to buy the machine and $15,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $ 3 million.The machine is expected to have a working life of seven years. If straight-line depreciation is used, what are the yearly depreciation expenses in this case?

A. $716,429

B. $1,142,857

C. $714,286

D.$1,145,000

2. Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $6,000,000 to buy the machine and $20,000 to have it delivered and installed. Building a clean room in the plant for the machine will cost an additional $3 million. The machine is expected to raise gross profits by $4,500,000 per year, starting at the end of the first year, with associated costs of $1 million for each of those years. The machine is expected to have a working life of six years and will be depreciated over those six years. The marginal tax rate is 40%. What are the incremental free cash flows associated with the new machine in year 2?

A. $2,496,667

B. $1,003,333

C. $2,501,333

D. $996,667

Reference no: EM132010930

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