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 $____ million
Incremental FCF for year 1 is $____ million
Incremental FCF for year 2 is $____ million
Incremental FCF for year 3 is $____ million
Incremental FCF for year 4 is $____ million
Incremental FCF for year 5 is $____ million
Incremental FCF for year 6 is $____ million
Incremental FCF for year 7 is $____ million
Incremental FCF for year 8 is $____ million
Incremental FCF for year 9 is $____ million
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