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Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $48,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $12,000. The grill will have no effect on revenues but will save Johnny’s $24,000 per year in energy expenses. The tax rate is 30%.

a. What are the operating cash flows in years 1 to 3?

b. What are total cash flows in years 1 to 3?

c. If the discount rate is 10%, should the grill be purchased?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91791919

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