Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Johnny's Lunches is considering purchasing a new, energy efficient grill. The grill will cost $39,000 and will be depreciated according to the 3-year MACRS schedule.

image text in transcribed
Johnny's Lunches is considering purchasing a new, energy efficient grill. The grill will cost $39,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $9,750. The grill will have no effect on revenues but will save Johnny's $19,500 in energy expenses per year. The tax rate is 30%. Use the MACRS depreciation schedule. a. What are the operating cash flows in each year? (Do not round intermediate calculations. Round your answers to 2 decimal places.) Operating Cash Flows b. What are the total cash flows in each year? (Do not round intermediate calculations. Round your answers to 2 decimal places) Cash FloWS c. Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream Should the gna beachased?to not round intermediate celculetions. Round your answer to 2 decimal places NPV of cash fow stream Shouild the grill be purchased

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Institutional Asset Management

Authors: Frank J Fabozzi, Francesco A Fabozzi

1st Edition

9811220034, 9789811220036

More Books

Students also viewed these Finance questions

Question

Identify the major phases of the training and HRD process

Answered: 1 week ago