What is the incremental free cash flow for year one

Reference no: EM13305709

Your company is considering the replacement of an old delivery van with a new one that is more efficient The old van cost $30,000 when it was purchased 5 years ago The old van is being depreiciated using the simplified straight-line method over useful life of 10 years The old van could be sold today for $5,000 The new van has an invoice price of $75,000 and it will cost $5,000 to modify the van to carry company's products. Cost savings from the use of the new van are expected to be $22,000 pere year for 5 years at which time the van will be sold for its estimated salvage value.The new van will be depreciated using the simplified straight method of 5 year useful life. The company's tax rate is 35% Working captial is expected to increase by $3,000 at the inception of the project but this amount will be recaptured at the end of year five. What is the incremental free cash flow for year one?

Reference no: EM13305709

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