You have been asked by the president of your company to evaluate the proposed ac
ID: 2470552 • Letter: Y
Question
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $420,000. The truck falls into the MACRS 5-year class, and it will be sold after 5 years for $67,000. Use of the truck will require an increase in NWC (spare parts inventory) of $6,700. The truck will have no effect on revenues, but it is expected to save the firm $121,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 30 percent. What will the cash flows for this project be during year 3?
$108,892
$28,252
$84,000
$165,340
Explanation / Answer
Answer:- $165340 during the 3 year
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