You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for$50,000. The truck falls into the MACRS 3-year class, is not eligible for either bonus depreciation or Section 179 expensing, and it willbe sold after three years for $19,100. Use of the truck will require an increase in NWC (spare parts inventory) of $1,100. The truck willhave no effect on revenues, but it is expected to save the firm $17,200 per year in before-tax operating costs, mainly labor. The firm'smarginal tax rate is 21 percent.What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2decimal places.)Year123FCF

In year 0, the cash flow would consist mainly of investment made in the truck and net working…

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Business

Accounting

What will the cash flows for this project be?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for
$50,000. The truck falls into the MACRS 3-year class, is not eligible for either bonus depreciation or Section 179 expensing, and it will
be sold after three years for $19,100. Use of the truck will require an increase in NWC (spare parts inventory) of $1,100. The truck will
have no effect on revenues, but it is expected to save the firm $17,200 per year in before-tax operating costs, mainly labor. The firm's
marginal tax rate is 21 percent.
What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2
decimal places.)
Year
1
2
3
FCF

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