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 total cash flovs in each year? (Negative amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Time Total Cash Flows (37.000.00) 16,650.00 16,650.00 1 2 3 18,650.00

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 total cash flovs in each year? (Negative amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) Time Total Cash Flows (37.000.00) 16,650.00 16,650.00 1 2 3 18,650.00

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

See similar textbooks

Similar questions

Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $40,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $10,000. The grill will have no effect on revenues but will save Johnny’s $20,000 in energy expenses. The tax rate is 30%. 1. Assuming the discount rate is 12%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?
Grill Master Johnnys is thinking about purchasing a new, energy-efficient grill. The grill will cost $53,000.00 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $11,750.00. The grill will have no effect on revenues but will save Johnny's $23,500.00 per year in energy expenses. The tax rate is 40%. The 3-year MACRS schedule; Year 1 2 3 4 Depr % 33.33 44.45 14.81 7.41 What is the total cash flow in year 3?
Johnny's Lunches is considering purchasing a new energy-efficient grill. The grill will cost $32,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $8,000. The grill will have no effect on revenues but will save Johnny's $16,000 in energy expenses. The tax rate is 30%. a). What are the operating cash flows each year? b). What are the total cash flows in each year? c). Assuming the discount rate is 12%, calculate the net present value of the cash flow stream. Should the grill be purchased?
10. M&T Inc. is considering a robotic lawn care machine. Base price is $200,000. Also $20,000 to install it and can be depreciated using straight line depreciation. It will save $100,000 a year for 5 years in the cost of using an outside lawn care company. The tax rate is 30%. (a) What is up front year 0 capital flow. (b) What are net cash flows for years 1 through 5 assuming salvage value end of year 5 is $30,000?
Stevie’s Sporting Goods is considering investing $33,000 in a new machine. The machine is expected to last five years and have a salvage value of $8,000. Annual after-tax net cash inflow from the machine is expected to be $7,000. Calculate the accounting rate of return (aka the unadjusted rate of return). (Enter your answer as a percentage rounded to one decimal place, but do NOT include the percentage sign. For example: 5 divided by 35 is 0.142857, which you would enter as “14.3”)
Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $38,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $9,500. The grill will have no effect on revenues but will save Johnny's $19,000 in energy expenses. The tax rate is 30%. Required: What are the operating cash flows in each year? What are the total cash flows in each year? Assuming the discount rate is 12%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? (round answers to 2 decimal places)
Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $19,000 and will be depreciated straight-line over 7 years to a salvage value of zero. The grill will have no effect on revenues, but will save Johnny's $20,000 in energy expenses. The tax rate is 31 percent. What are the operating cash flows in years 1 to 7? Enter your answer below. Number
You are the owner of a book store and you are considering adding a coffee bar to your store. The cost of the expansion will be $ 1 million, and you expect to depreciate it over the coffee bar’s four year life, using straight line depreciation to an expected salvage value of $ 500,000 at the end of the fourth year. You will also borrow $ 400,000 from a bank, using a four year balloon-payment loan (only interest paid for four years, the principal is due at the end of the fourth year) with an interest rate of 10%. The coffee bar is expected to generate $ 500,000 in revenues in the first year, $ 600,000 in revenues in the second year, $ 550,000 in the third year and $ 500,000 in the fourth year. The expenses of operating the bar are expected to be 40% of revenues each year and the tax rate is 35%. Estimate the return on equity on this investment each year for the next four years. If your cost of equity is 12%, would you invest in this coffee bar. If your cost of equity is 12%, estimate…
A firm is considering purchasing a machine that costs $56000. It will be used for six years, and the salvage value at that time is expected to be zero. The machine will save $45000 per year in labor, but it will incur $9000 in operating and maintenance costs each year. The machine will be depreciated according to five-year MACRS. The firm's tax rate is 40%, and its after-tax MARR is 14%. Should the machine be purchased?
Billy Bob's Monster Trucks is considering the purchase of some new vehicles. The total cost for the vehicles is $202,400 and they are to be depreciated straight-line to zero over 10 years. The vehicles will be used for 5 years, after which they can be sold for $25,300. If the relevant tax rate is 30 percent, what is the after-tax cash flow from the sale of this asset? (Do not round your intermediate calculations.) NOTE: Taxes are affected when the asset is sold at either a gain or loss over book value. Multiple Choice O $45,666 $17,710 $48,070 $336,502 $50,474 ↓
Charlie's Hamburgers is considering adding pizza to its menu. The pizza require purchasing cooking equipment on sale for $55,000. The asset has a 6-year life, will produce a cash flow of $17,600 in the first year, $19,000 in the second year, $20, 250 in the third year, $21,750 in the fourth year, 22, 500 in the fifth year, and $23,000 in the sixth year. The cost of capital is 10%. What is the project's Internal Rate of Return (IRR)? Net Present Value (NPV)? and Profitability Index (PI)?
Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $29,000 and will be depreciated straight-line over 8 years to a salvage value of zero. The grill will have no effect on revenues, but will save Johnny's $13,000 in energy expenses. The tax rate is 37 percent. What are the operating cash flows in years 1 to 8?

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS