Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $44,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $11,000. The grill will have no effect on revenues but will save Johnnys $22,000 in energy expenses. The tax rate is 30%.

What are the operating cash flows in each year 1. 2. 3.

What are the total cash flows in each year 1. 2. 3.

Assuming the discount rate is 11% , calculate the NPV of the cash flow stream. Should the grill be purchased?