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Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $36,000 and will be depreciated straight-line over 3 years. It will be
Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $36,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $9,000. The grill will have no effect on revenues but will save Johnnys $18,000 in energy expenses. The tax rate is 30%.
What are the operating cash flows in each year?
What are the total cash flows in each year?
Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?
\begin{tabular}{|c|c|} \hline Year & Operating Cash Flows \\ \hline 0 & \\ \hline 1 & \\ \hline 2 & \\ \hline 3 & \\ \hline 4 & \\ \hline 5 & \\ \hline \end{tabular} \begin{tabular}{|c|c|} \hline Time & Total Cash Flows \\ \hline 0 & \\ \hline 1 & \\ \hline 2 & \\ \hline 3 & \\ \hline 4 & \\ \hline 5 & \\ \hline \end{tabular} NPV of cash flow stream Should the grill be purchasedStep by Step Solution
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