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Problem:

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, and it will be sold after three years for $19,600. Use of the truck will require an increase in NWC (spare parts inventory) of $1,600. The truck will have no effect on revenues, but it is expected to save the firm $23,800 per year in before-tax operating costs, mainly labor. The firms marginal tax rate is 34 percent.

Required:

Question: What will the cash flows for this project be?

Note: Please show how to work it out.

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M91148096

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