Question: I need help with the question below. If it could be written down and broke down so I could understand it, that would be great.
I need help with the question below. If it could be written down and broke down so I could understand it, that would be great.
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 3-year class, is not eligible for either bonus depreciation or Section 179 expensing, and it will be sold after three years for $20,500. Use of the truck will require an increase in NWC (spare parts inventory) of $2,500. The truck will have no effect on revenues, but it is expected to save the firm $23,400 per year in before-tax operating costs, mainly labor. The marginal rate is 21 percent.
What will the cash flows for this project be year years 0, 1, 2, & 3?
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