Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $43,000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $10,750. The grill will have no effect on revenues but will save Johnny's $21,500 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 12%, 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 2 3 4 5 Operating Cash Flows
Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $43,000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $10,750. The grill will have no effect on revenues but will save Johnny's $21,500 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 12%, 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 2 3 4 5 Operating Cash Flows
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 9E: Each of the following scenarios is independent. All cash flows are after-tax cash flows. Required:...
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Question
![Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $43,000 and will be depreciated straight-
line over 3 years. It will be sold for scrap metal after 5 years for $10,750. The grill will have no effect on revenues but will save Johnny's
$21,500 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 12%, 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
2
3
4
5
Operating Cash
Flows](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F746be384-cb89-4e0f-abc5-c026989fdeb1%2F711ae1e1-f4dd-4791-a87f-e3cf6fd74ceb%2Fmjckeo_processed.png&w=3840&q=75)
Transcribed Image Text:Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $43,000 and will be depreciated straight-
line over 3 years. It will be sold for scrap metal after 5 years for $10,750. The grill will have no effect on revenues but will save Johnny's
$21,500 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 12%, 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
2
3
4
5
Operating Cash
Flows
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