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Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $42,000 and will be depreciated straight- line over 3 years. It will
Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $42,000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $10,500. The grill will have no effect on revenues but will save Johnny's $21,000 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? Complete this question by entering your answers in the tabs below. Required A Required B Required 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 Complete this question by entering your answers in the tabs below. Required A Required B Required 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 Complete this question by entering your answers in the tabs below. Required A Required B Required 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?
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