What are incremental free cash flows for cameron industries

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Problem 1: Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $5,000,000 to buy the machine and $10,000 to have it delivered and installed. 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?

Option 1: $2,665,000

Option 2: $831,667

Option 3: $2,434,000

Option 4: $835,000

Reference no: EM132856623

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