Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $37,000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $9,250. The grill will have no effect on revenues but will save Johnny's $18,500 in energy expenses. The tax rate is 30%. Required: a. What are the operating cash flows in each year? b. What are the total cash flows in each year? c. Assuming the discount rate is 11%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? Complete this question by entering your answers in the tabs below. Required A Required B Required C What are the operating cash flows in each year? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year 0 1 Operating Cash Flows 2 3 4 5
Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $37,000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $9,250. The grill will have no effect on revenues but will save Johnny's $18,500 in energy expenses. The tax rate is 30%. Required: a. What are the operating cash flows in each year? b. What are the total cash flows in each year? c. Assuming the discount rate is 11%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? Complete this question by entering your answers in the tabs below. Required A Required B Required C What are the operating cash flows in each year? Note: Do not round intermediate calculations. Round your answers to 2 decimal places. Year 0 1 Operating Cash Flows 2 3 4 5
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
Related questions
Question
am. 121.
Transcribed Image Text:Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $37,000 and will be depreciated straight-
line over 3 years. It will be sold for scrap metal after 5 years for $9,250. The grill will have no effect on revenues but will save Johnny's
$18,500 in energy expenses. The tax rate is 30%.
Required:
a. What are the operating cash flows in each year?
b. What are the total cash flows in each year?
c. Assuming the discount rate is 11%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?
Complete this question by entering your answers in the tabs below.
Required A
Required B Required C
What are the operating cash flows in each year?
Note: Do not round intermediate calculations. Round your answers to 2 decimal places.
Year
0
1
Operating Cash
Flows
2
3
4
5
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