Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Johnny's Lunches is considering purchasing a new energy efficient grill. The grill will cost $45.000 and will be depreciated straight- line over 3 years. It
Johnny's Lunches is considering purchasing a new energy efficient grill. The grill will cost $45.000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $11,250. The grill will have no effect on revenues but will save Johnny's $22.500 in energy expenses. The tax rate is 30% Required: a. What are the operating cash flows in each year? b. What are the total cash flows in each year? c. Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? Complete this question by entering your answers in the tabs below. Required Required B Required What are the operating cash flows in each year? (Do not round Intermediate calculations. Round your answers to 2 decimal Year Operating Cash Flows 2 3 Required B > Johnny's Lunches is considering purchasing a new, energy efficient grill. The grill will cost $45,000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $11,250. The grill will have no effect on revenues but will save Johnny's $22.500 in energy expenses. The tax rate is 30% Required: a. What are the operating cash flows in each year? b. What are the total cash flows in each year? c. Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? Complete this question by entering your answers in the tabs below. Required A Required B Required c What are the total cash flows in each year? (Negative amounts should be indicated with a minus sign. Do not round Intermediate calculations. Round your answers to 2 decimal places.) Time Total Cash Flows 0 1 2 Johnny's Lunches is considering purchasing a new, energy efficient grill. The grill will cost $45,000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $11,250. The grill will have no effect on revenues but will save Johnny's $22.500 in energy expenses. The tax rate is 30%. Required: a. What are the operating cash flows in each year? b. What are the total cash flows in each year? c. Assuming the discount rate is 10% calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? Complete this question by entering your answers in the tabs below. Required A Required B Required C Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? Do not round Intermediate calculations. Round your answer to 2 decimal places.) NPV of cash flow stream Should the grill be purchased?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started