Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $35,000 and will bedepreciated

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Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $35,000 and will bedepreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $8,750. The grill will have no effect on revenues but will save Johnny's $17,500 in energy expenses. The tax rate is 30%.

Required:

a.What are the operating cash flows in each year?

b.What are the total cash flows in each year?

c.Assuming the discount rate is 12%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?

Posted Date: May 18, 2024 02:03 PM

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Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $35,000 and will bedepreciated

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