Question
johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $47,000 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 $47,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $11,750. The grill will have no effect on revenues but will save Johnnys $23,500 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 11%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?
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Income Tax Fundamentals 2013
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
31st Edition
1111972516, 978-1285586618, 1285586611, 978-1285613109, 978-1111972516
