you have been asked by the president of your company to evaluate the proposed acquisition of a new special purpose truck for $70,000. The Truck falls into the MACRS three-year class, and it will be sold after 3 years for $5,000.  Use of the truck will require an increase in NWC of $10,000.  The truck will have no effect on revenues, but it is expected to save the firm $32,000 per year in before-tax operating costs, mainly labour. The firm's marginal tax rate is 40 percent. What will the operating cashflow for this project be during year 2?

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
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you have been asked by the president of your company to evaluate the proposed acquisition of a new special purpose truck for $70,000. The Truck falls into the MACRS three-year class, and it will be sold after 3 years for $5,000.  Use of the truck will require an increase in NWC of $10,000.  The truck will have no effect on revenues, but it is expected to save the firm $32,000 per year in before-tax operating costs, mainly labour. The firm's marginal tax rate is 40 percent. What will the operating cashflow for this project be during year 2?

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