Posted: June 14th, 2020

hat incremental free cash flows should be included to account for the need to accelerate the purchase of the tank cars? Business and finance homework help

Question description

Mersey Chemicals manufactures polypropylene that it ships to its customers via tank car. Currently, it plans to add two additional tank cars to its fleet 4 years from now. However, a proposed plant expansion will require Mersey’s transport division to add these two additional tank cars in 3 years’ time rather than in 4 years. The current cost of a tank car is $2.1 million, and this cost is expected to remain constant. Also, while tank cars will last indefinitely, they will be depreciated straight-line over a five-year life for tax purposes. Suppose Mersey’s tax rate is 45%. When evaluating the proposed expansion, what incremental free cash flows should be included to account for the need to accelerate the purchase of the tank cars? Incremental FCF for year 0 is $____ millionIncremental FCF for year 1 is $____ millionIncremental FCF for year 2 is $____ millionIncremental FCF for year 3 is $____ millionIncremental FCF for year 4 is $____ millionIncremental FCF for year 5 is $____ millionIncremental FCF for year 6 is $____ millionIncremental FCF for year 7 is $____ millionIncremental FCF for year 8 is $____ millionIncremental FCF for year 9 is $____ million

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