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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 $19,000. 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 39 percent.

Required:

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

Note: Provide support for your underlying principle.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91167655

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