You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. 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 $20,900. Use of the truck will require an increase in NWC (spare parts inventory) of $2,900. The truck will have no effect on revenues, but it is expected to save the firm $20,300 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.) FCF Year 0 1 2 3
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. 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 $20,900. Use of the truck will require an increase in NWC (spare parts inventory) of $2,900. The truck will have no effect on revenues, but it is expected to save the firm $20,300 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.) FCF Year 0 1 2 3
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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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
$60,000. 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 $20,900. Use of the truck will require an increase in NWC (spare parts inventory) of $2,900. The truck will
have no effect on revenues, but it is expected to save the firm $20,300 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.)
FCF
Year
0
1
2
3
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