Assume it is January 2018 and Johnny's Lunches is considering purchasing a new, energy-ell The grill will cost $19,900 and will be depreciated in an asset class that carries a CCA rate of 30%. It will be sold for scrap metal after 3 years for $5,100. The grill will have no effect on revenues but will save Johnny's $10,500 in energy expenses. The firm has other assets in this asset class. The tax rate is 35%. Assume the discount rate is 5%. a. What are the operating cash flows in years 1 to 3? (Do not round intermediate calculations. Round your answers to the nearest whole dollar.) The operating cash flow in year 2018 The operating cash flow in year 2019 Bow in ver2020 Amount
Assume it is January 2018 and Johnny's Lunches is considering purchasing a new, energy-ell The grill will cost $19,900 and will be depreciated in an asset class that carries a CCA rate of 30%. It will be sold for scrap metal after 3 years for $5,100. The grill will have no effect on revenues but will save Johnny's $10,500 in energy expenses. The firm has other assets in this asset class. The tax rate is 35%. Assume the discount rate is 5%. a. What are the operating cash flows in years 1 to 3? (Do not round intermediate calculations. Round your answers to the nearest whole dollar.) The operating cash flow in year 2018 The operating cash flow in year 2019 Bow in ver2020 Amount
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Assume it is January 2018 and Johnny's Lunches is considering purchasing a new, energy-efficient grill.
The grill will cost $19,900 and will be depreciated in an asset class that carries a CCA rate of 30%. It will
be sold for scrap metal after 3 years for $5,100. The grill will have no effect on revenues but will save
Johnny's $10,500 in energy expenses. The firm has other assets in this asset class. The tax rate is 35%.
Assume the discount rate is 5%.
a. What are the operating cash flows in years 1 to 3? (Do not round intermediate calculations. Round
your answers to the nearest whole dollar.)
The operating cash flow in year 2018
The operating cash flow in year 2019
The operating cash flow in year 2020
b. What are total cash flows in years 1 to 3? (Do not round intermediate calculations. Round your
answers to the nearest whole dollar. Enter negative values with a minus sign.)
The total cash flow in year 2018
The total cash flow in year 2019
The total cash flow in year 2020
Amount
If the discount rate is 5%, the grill
Amount
c. If the discount rate is 5%, should the grill be purchased?
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