You have been asked by the president of your company to evaluate the proposed acquisition of a
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Question:
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $250,000. The truck falls into the MACRS 10-year class, and it will be sold after 10 years for $25,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,500. The truck will have no effect on revenues, but its expected use at your company will save the firm $103,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21 percent. What will the operating cash flows for this project be during year 2?
$90,820
$126,370
$58,000
$97,500
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