Cameron Industries is
purchasing a new chemical vapor depositor in order to make silicon
chips. It will cost $6 million to buy the machine and $10,000 to
have it delivered and installed. Building a clean room in the plant
for the machine will cost an additional $3 million. The machine is
expected to raise gross profits by $4 million per year, starting at
the end of the first year, with associated costs of $1 million for
each of those years. The machine is expected to have a working life
of six years and will be depreciated over those six years. The
marginal tax rate is 40%. What are the incremental free cash flows
associated with the new machine in year 1?

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