I am needing help with this problem for my finance class. Thank you all! \"You h
ID: 2712991 • Letter: I
Question
I am needing help with this problem for my finance class. Thank you all!
"You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $19,500. Use of the truck will require an increase in NWC (spare parts inventory) of $1,500. The truck will have no effect on revenues, but it is expected to save the firm $20,500 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 35 percent."
What will the cash flows for this project be? I need to find the future cash flows for years 0, 1, 2, and 3, for negative amounts to be indicated by a minus sign, and for the answers to be rounded to 2 decimal places.
Explanation / Answer
Total Price $60,000 Depriciation as per MACRS 3 year schedule Year 1 2 3 4 Amount $20,000 $26,700.000 $8,880.000 $4,420 Labor savings $20500/per year NWC $1,500 Cash flow Year 0 1 2 3 Amount ($650.00) ($5,005.00) $6,578.00 $9,477.00
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