Expected Cash Flows: FireRock Wheel Corp Is Evaluating a Project

Multiple Choice

Expected cash flows: 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. If cash expenses will be $1.0 million while depreciation expense 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?

A) $200,000
B) $420,000
C) $600,000
D) $620,000