You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $190,000. The truck falls into the MACRS 5-year class, and it will be sold after 5 years for $19,000. Use of the truck will require an increase in NWC (spare parts inventory) of $4,900. The truck will have no effect on revenues, but it is expected to save the firm $86,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21 percent. What will the operating cash flows for this project be during year 2? Multiple Choice O $80,708 $81,100 O $128,740 O $25,200
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $190,000. The truck falls into the MACRS 5-year class, and it will be sold after 5 years for $19,000. Use of the truck will require an increase in NWC (spare parts inventory) of $4,900. The truck will have no effect on revenues, but it is expected to save the firm $86,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21 percent. What will the operating cash flows for this project be during year 2? Multiple Choice O $80,708 $81,100 O $128,740 O $25,200
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
Question
![You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $190,000. The truck falls
into the MACRS 5-year class, and it will be sold after 5 years for $19,000. Use of the truck will require an increase in NWC (spare parts inventory) of
$4,900. The truck will have no effect on revenues, but it is expected to save the firm $86,000 per year in before-tax operating costs, mainly labor. The
firm's marginal tax rate is 21 percent. What will the operating cash flows for this project be during year 2?
Multiple Choice
O
$80,708
$81,100
O
$128,740
O
$25,200](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7b30de8d-ad69-4e08-b4ac-923a78b71680%2F1225869d-f664-4557-804d-e49351bb6838%2Fvzc38k_processed.jpeg&w=3840&q=75)
Transcribed Image Text:You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $190,000. The truck falls
into the MACRS 5-year class, and it will be sold after 5 years for $19,000. Use of the truck will require an increase in NWC (spare parts inventory) of
$4,900. The truck will have no effect on revenues, but it is expected to save the firm $86,000 per year in before-tax operating costs, mainly labor. The
firm's marginal tax rate is 21 percent. What will the operating cash flows for this project be during year 2?
Multiple Choice
O
$80,708
$81,100
O
$128,740
O
$25,200
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