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You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck. The truck's basic price is

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You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck. The truck's basic price is $57,000. The truck will be fully depreciated to 0 using straight line depreciation and it will be sold after three years for $20,000. Use of the truck will require an increase in net working capital (spare parts inventory) of $3,000. The truck will have no effect on revenues, but it is expected to save the firm $19,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent. What is the initial investment outlay for the truck? (That is, what is the Year O net cash flow?) What is the incremental operating cash flow in Year 1 ? What is the terminal (nonoperating) cash flow at the end of Year 3? The truck's required rate of return is 10 percent. What is its NPV

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