Question: Johnnny's Lunches is considering purchasing a new, energy - efficient grill. The grill will cost $ 3 1 , 0 0 0 and will be

Johnnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $31,000 and will be appreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $7,750. The grill will have no effect on revenues but will save Johnny's $15,500 in energy expenses. The tax rate is 30%.
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 11%, calculate the net present value of the cash flow stream. Should the grill be purchased?

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