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What are the incremental free cash flows

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Question - Epic Foods plan on releasing a new range of sugar-free candies. To produce the new candy range, equipment costing $2 million (inclusive of delivery and installation costs) will need to be acquired. The equipment will be depreciated on a straight-line basis over four years. In addition to the above, $5 million will be spent in the first year on advertising the new candy line. The new candies are expected to bring in revenues of $4 million per year for the next four years with production and support costs totaling $1.5 million per year. If Epic Foods' tax rate is 35%, what are the incremental free cash flows in the second year of this project?

a. $3.300 million

b. $1.800 million

c. $2.000 million

d. $1.300 million

Reference no: EM132574796

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