What are the incremental free cash flows associated

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Problem 1: Cameron Industries is purchasing a new chemical vapor depositor in order to make silicon chips. It will cost $7,000,000 to buy the machine and $10,000 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 five years and will be depreciated over those five years. The marginal tax rate is? 40%. What are the incremental free cash flows associated with the new machine in year? 2?

A. $1,398,000
B. $2,660,800
C. $1,402,000
D. $2,098,000

Reference no: EM132729836

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