Question
Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $30,000 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 $30,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $7,500. The grill will have no effect on revenues but will save Johnnys $15,000 in energy expenses. The tax rate is 30%. A) What are the operating cash flows in years 1, 2, 3, 4, 5? B) What are the total cash flows in years 1, 2, 3, 4, 5? C)Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started