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
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