You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $330,000.The truck falls into the MACRS 3-year class, and it will be sold after 3 years for $58,000, Use of the truck will require an increase in NWC (spareparts inventory) of $5,800. The truck will have no effect on revenues, but its expected use at your company will save the firm $85,000 per yearin before-tax operating costs, mainly labor. The firm's marginal tax rate is 21 percent. What will the cash flows for this project be during year 3?Multiple Choice$116,023$77,413$281.540

Cash flows in during year 3 will be calculated by using equation below.Cash flows in year 3 = Operating cash flows + Recovery of working capital + After tax salvage value.FormulasCash flows in year 3 will be 134168(rounded nearest dollar)

Answered: You have been asked by the president of…

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

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