23 Jul WHAT IS THE INCREMENTAL FREE CASH FLOW DURING YEAR 1 OF THE PROJECT?
RW Corp. needs to replace an old lathe with a new more efficient model. The old lathe was purchased Show more RW Corp. needs to replace an old lathe with a new more efficient model. The old lathe was purchased for $50000 nine years ago and has a current book value of $5000. (The old machine is being depreciated on a straight-line basis over a ten-year useful life.) The new lathe costs $100000. It will cost the company $10000 to get the new lathe to the factory and get it installed. The old machine will be sold as scrap metal for $2000. The new machine is also being depreciated on a straight-line basis over ten years. Sales are expected to increase by $8000 per year while operating expenses are expected to decrease by $12000 per year. QRWs marginal tax rate is 40%. Additional working capital of $3000 is required to maintain the new machine and higher sales level. The new lathe is expected to be sold for $5000 at the end of the projects ten-year life. What is the incremental free cash flow during year 1 of the project? Select one: a. $12800 b. $15200 c. $11400 d. $14400 Show less
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