What are the incremental free cash flows

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Reference no: EM131061178

CathFoods will release a new range of candies which contain antioxidants. New equipment to manufacture the candy will cost $2 million, which will be depreciated by straight-line depreciation over five years. In addition, there will be $5 million spent on promoting the new candy line, which will be listed as an expense on the income statement. It is expected that the range of candies will bring in revenues of $4 million per year for five years with production and support costs of $1.5 million per year. If CathFood's marginal tax rate is 35%, what are the incremental free cash flows in the SECOND year of this project?

A) $1.765 million

B) $2.015 million

C) $2.415 million

D) $2.500 million

Reference no: EM131061178

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