Incremental Cash Flow Question

CFA Level II
#1

You are considering adding 3 coffee machines to meet upcoming demands. Cost of coffee machine is $2,000 each. You will be charged a one off installation cost of $100 for set-up. Your machines will have a 5 years economic life with no salvage value. The machines is expected to increase your revenue by 1000 annually, whilst operating it at a cost of 350 annually. Your initial budget is $7,000 investment.

What would be the annual incremental cash flow from year 1 to 5?

#2

For each operating year:
Additional revenue $1000
Depreciation $400 (assuming straight line depreciation)
Operating cost $350
Incremental cash flow $1,000 - $400 -$350 = $250 (assuming no tax)

#3

Would the depreciation be calculated only for one machine and not 3 machines?

I calculated it as 1,200 (6000/5)

#4

You are right! I computed depreciation for just one machine instead of three. Sorry.