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What will the free cash flows for this project

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Question - You are evaluating the acquisition of a new vehicle for $85.000. The vehicle falls into the MACRS three-year class (the depreciation rates are: Year 1 at 33% Year 2 at 44,45%Year 3 at 14.81%, and Year 4 at 7.41%) and it will be sold the end of Year 3 for $20,000. Use of the vehicle requires an increase in NWC $2.000. The has incremental sales of $ 100,000 each year) in Years 2 truck will have no effect on revenues, but is expected to save the firm $ 20,000 per year in pre-tax operating costs. The firm's marginal tax rate is 40 percent. What will the free cash flows for this project be in Year 2 and Year 3?

Reference no: EM132764483

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