Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $45,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $11,250. The grill will have no effect on revenues but will save Johnny’s $22,500 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 10%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? Req A What are th operating cash flows in each year? 1. 2. 3. Req B What are the total cash flows in each year? 0. 1. 2. 3. Req C Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream, should the grill be purchased?
Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $45,000 and will be
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 10%, calculate the
Req A
What are th operating cash flows in each year?
1.
2.
3.
Req B
What are the total cash flows in each year?
0.
1.
2.
3.
Req C
Assuming the discount rate is 10%, calculate the net present value (NPV) of the cash flow stream, should the grill be purchased?
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