Free Cash Flow Assignment | Homework For You

Casa Grande Farms is considering purchasing multiple tractors for a total purchase price of​ $540,000. These tractors are expected to generate EBITDA of​ $250,000 for each of the next three years. Casa Grande Farms has a​ 35% tax rate and has a cost of capital of​ 10%. Assume that Casa Grande Farms is planning to sell the tractors after two​ years, when its book value is​ $119,988, for a total price of​ $180,000. What is the effect on free cash flow in the year it is​ sold?

A. A cash inflow of $39,008

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B. A cash outflow of $39,008

C. A cash outflow of $60,012

D. A cash inflow of $60,012. Get Finance homework help today