Determine the annual free cash flows

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Question - Gravity is considering a new product with $50 million in sales and $30 million in cost of goods sold each year for the next 3 years (does not include depreciation expense). They will need a new machine that costs $9 million dollars. They will depreciate the machine to a zero book value using straight-line depreciation over 3 years. Interest expense is $1,000,000 per year. The tax rate is 25%. Determine the annual free cash flows.

Years 1 through 3: $20,000,000

Years 1 through 3: $15,000,000

Years 1 through 3: $11,750,000

Years 1 through 3: $15,750,000

Years 1 through 3: $14,750,000

Reference no: EM132965340

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