Question
Assume it is January 2018 and Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $20,600 and will be depreciated in
Assume it is January 2018 and Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $20,600 and will be depreciated in an asset class that carries a CCA rate of 30%. It will be sold for scrap metal after 3 years for $5,700. The grill will have no effect on revenues but will save Johnny's $9,100 in energy expenses. The firm has other assets in this asset class. The tax rate is 35%. Assume the discount rate is 6%. a. What are the operating cash flows in years 1 to 3? (Do not round intermediate calculations. Round your answers to the nearest whole dollar.)
Amount | |
The operating cash flow in year 2018 | |
The operating cash flow in year 2019 | |
The operating cash flow in year 2020 |
b. What are total cash flows in years 1 to 3? (Do not round intermediate calculations. Round your answers to the nearest whole dollar. Enter negative values with a minus sign.)
Amount | |
The total cash flow in year 2018 | |
The total cash flow in year 2019 | |
The total cash flow in year 2020 |
c. If the discount rate is 6%, should the grill be purchased?
If the discount rate is 6%, the grill |
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