Problem:
FireRock Wheel Corp. is evaluating a project in which there is a 40 percent probability of revenues totaling $3 million and a 60 percent probability of revenues totaling $ 1 million per year.
Required:
Question: If cash expenses will be $1 million while depreciation expens will be $200,000 then what is the expected free cash flow from taking the project if the marginal tax rate for the firm is 30 percent?
Note: Show supporting computations in good form.