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What is the incremental free cash ?ow

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The Hershey Company is planning on releasing a new line of gluten-free candy products. New equipment needed to manufacture the candy will cost $3.9 million and will be depreciated by straight-line depreciation over 6 years. In addition, there will be $7 million spent on marketing and promotion of the new candy line in the ?rst year only. It is expected that the new candy line will generate incremental revenue of $6.2 million per year for 6 years with associated production and support costs of $1.5 million per year. If Hershey's marginal tax rate is 21%, what is the incremental free cash ?ow in YEAR 2 of this project?

  • A. $-1.681 million
  • B. $4.532 million
  • C. $3.850 million
  • D. $3.200 million

Reference no: EM133057588

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