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 $20,00O. Use of the truck will require an increase in NWC (spare parts inventory) of $2,000. The truck will have no effect on revenues, but it is expected to save the firm $20,000 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
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 $20,00O. Use of the truck will require an increase in NWC (spare parts inventory) of $2,000. The truck will have no effect on revenues, but it is expected to save the firm $20,000 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
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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Question
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 $20,000. Use of the
truck will require an increase in NWC (spare parts inventory) of $2,000. The truck will have no effect on
revenues, but it is expected to save the firm $20,000 per year in before-tax operating costs, mainly labor.
The firm's marginal tax rate is 21 percent.
ts
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.)
Print
Year
1
2
ferences
FCF
Transcribed Image Text:MACRS Depreciation
Real Estate
Residential
Normal Recovery Period
7
Nonresidential
31.5
Year
3
5
10
15
20
27.5
39
1
33.33%
20 00%
14.29%
10.00%
5.00%
3.750%
3 485%
3.042%
2.461%
2
44.45
32 00
24 49
18.00
9.50
7.219
3 636
3.175
2.564
3
14.81
19 20
17.49
14.40
8.55
6.677
3.636
3.175
2.564
4
7.41
11.52
12.49
11.52
7.70
6.177
3.636
3.175
2.564
0.00
11.52
8.93
9.22
6.93
5.713
3.636
3.175
2.564
0.00
5.76
8.92
7.37
6.23
5.285
3.636
3.175
2.564
7
0.00
0.00
8.93
6.55
5.90
4.888
3.636
3.175
2.564
0.00
0.00
4.46
6.55
5.90
4.522
3.636
3.175
2.564
0.00
0.00
0.00
6.56
5.91
4.462
3.636
3.174
2.564
10
0.00
0.00
0.00
6.55
5.90
4.461
3.637
3.175
2.564
11
0.00
0.00
0.00
3.28
5.91
4.462
3.636
3.174
2.564
12
0.00
0.00
0.00
0.00
5.90
4.461
3.637
3.175
2.564
13
0.00
0.00
0.00
0.00
5.91
4.462
3.636
3.174
2.564
14
0.00
0.00
0.00
0.00
5.90
4.461
3.637
3.175
2.564
15
0.00
0 00
0.00
0.00
5.91
4.462
3.636
3.174
2.564
16
0.00
0.00
0.00
0.00
2.95
4.461
3.637
3.175
2.564
0 00
0 00
0 00
0 00
0 00
17
0.00
0.00
0.00
0.00
4.462
3.636
3.174
2.564
18
0.00
0.00
0.00
0.00
4.461
3 637
3.175
2.564
19
0.00
0.00
0.00
0.00
4.462
3.636
3.174
2.564
20
0.00
0 00
0.00
0.00
4.461
3.637
3.175
2.564
21
0.00
0.00
0.00
0.00
2.231
3.636
3.174
2.564
22
0.00
00
0.00
0.00
0.00
0.00
3.637
3.175
2.564
23
0.00
0.00
0.00
0.00
0.00
0.00
3.636
3.174
2.564
24
0.00
00
0.00
0.00
0.00
0.00
3.637
3.175
2.564
25
0.00
00
0 00
0.00
0 00
0.00
3.636
3.174
2.564
26
0.00
0.00
0.00
0.00
0.00
0.00
3.637
3.175
2.564
27
0.00
0.00
0 00
0.00
0.00
0.00
3.636
3.174
2564
28
0.00
0.00
0.00
0.00
0.00
0.00
1.970
3.175
2.564
29
0.00
0 00
0.00
0.00
0.00
0.00
0.00
3.174
2.564
30
0.00
0.00
0.00
0.00
0.00
0.00
0.00
3.175
2.564
31
0.00
00
0.00
0.00
0.00
0.00
0.00
3.174
2.564
32
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1.720
2.564
33
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2.564
34
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2.564
35
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2.564
36
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2.564
37
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
2.564
38
0.00
0 00
0.00
0.00
0.00
0.00
00
0.00
2.564
39
0.00
00
0.00
0.00
0.00
0.00
0.00
0.00
2.564
40
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.107
41
0.00
0.00
0.00
0.00
0.00
0.00
0 00
0.00
0.000
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