Question
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $75,000, to be used
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $75,000, to be used for 3 years. The truck will be depreciated over 10 years using straight line depreciation and it will be sold after three years for $10,000. Use of the truck will require an increase in NWC (spare parts inventory) of $4,000. The truck will have no effect on revenues, but it is expected to save the firm $30,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 30 percent. What will the operating cash flow for this project be during year 0,1,2 and 3 ?
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