Question
Two years ago, the Krusty Krab Restaurant purchased a grill for $600 (in $ thousands). The owner, Eugene Krabs, has learned that a new grill
Two years ago, the Krusty Krab Restaurant purchased a grill for $600 (in $ thousands). The owner, Eugene Krabs, has learned that a new grill is available that will cook Krabby Patties twice as fast as the existing grill. This new grill can be purchased for $917 thousand and would be depreciated straight line over 5 years, after which it would have no salvage value. The current grill is being depreciated straight line over its useful life of 2 years with no expected salvage value. The existing grill can be sold to a competitor (The Chum Bucket) now for $306 thousand. The Krusty Krabs tax rate is 24%. What would be the incremental cash flow that the Krusty Krab will incur today (in thousands, rounded to one decimal place, e.g., 12.3) if it elects to upgrade to the new grill? If it is expected to be a net cash outflow, enter a negative sign in front of your answer.
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