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Computation of net investment and net operating cash flows

Syracuse Road building Company is considering the purchase of a new tandem box dump truck. The truck costs$95,000, and an additional$5,000 is needed to paint it with the firm logo and install radio equipment. Assume the truck falls into the MACRS three-year class. The truck will generate no additional revenues, but it will reduce cash operating expenses by$35,000 per year. The truck will be sold for$40,000 after its five-year life. An inventory investment of$4,000 is required during the life of the investment. Syracuse Road building is in the 45% income tax bracket.

a) What is the net investment?

b) What is the after-tax net operating cash flow for each of the five years?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9161999

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