Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $48,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $12,000. The grill will have no effect on revenues but will save Johnnys $24,000 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 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?

• Required 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

Required B

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

Time	Total Cash Flows
0
1
2
3

Required C

Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

NPV of cash flow stream
Should the grill be purchased?