Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $36,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 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%. 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.)

Year Operating Cash Flows

1 $

2

3

b. What are the total cash flows in each year? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Time Total Cash Flows

0 $

1

2

3

c. If the discount rate is 10%, should the grill be purchased?

Yes No