Question
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $400,000. The truck falls
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $400,000. The truck falls into the MACRS 10-year class, and it will be sold after 10 years for $65,000. Use of the truck will require an increase in NWC (spare parts inventory) of $6,500. The truck will have no effect on revenues, but it is expected to save the firm $103,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent. What will the cash flows for this project be during year 3?
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