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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, and it will be sold after three years for $20,200. Use of the truck will require an increase in NWC (spare parts inventory) of $2,200. The truck will have no effect on revenues, but it is expected to save the firm $23,500 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 34 percent.

What will the cash flows for this project be? (FCF for year 0, 1, 2, and 3)?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91793459

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