You have been asked by the president of your company to evaluate the proposed acquisition of...
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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 $19,000. Use of the truck will require an increase in NWC (spare parts inventory) of $1,000. The truck will have no effect on revenues, but it is expected to save the firm $24,000 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? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year 0 1 2 3 FCF $ (71,000.00) $ 23,859.51 $ 30,513.93 $ 45,177.07 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 $19,000. Use of the truck will require an increase in NWC (spare parts inventory) of $1,000. The truck will have no effect on revenues, but it is expected to save the firm $24,000 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? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Year 0 1 2 3 FCF $ (71,000.00) $ 23,859.51 $ 30,513.93 $ 45,177.07
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