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, is not eligible for either bonus depreciation or Section 179 expensing, 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 21 percent. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) O Answer is complete but not entirely correct. Year 1 FCF 71,000.00 X S 23,859.51 O $ 25,494.15 $ 40,137.07
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, is not eligible for either bonus depreciation or Section 179 expensing, 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 21 percent. What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.) O Answer is complete but not entirely correct. Year 1 FCF 71,000.00 X S 23,859.51 O $ 25,494.15 $ 40,137.07
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 14P
Related questions
Question
![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, is not eligible for either bonus depreciation or Section 179 expensing, 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 21 percent.
What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2
decimal places.)
Answer is complete but not entirely correct.
Year
1
3
FCF
71,000.00
23,859.51 O $
25,494.15 O $
40,137.07
< Prey
14 of 14
Next>
MacBook Air
DII
DD
000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fdcd289bd-54ab-4e8a-962a-c9351c6f586f%2F3c9a3095-75e7-4ddc-9fe1-f0099f4cff1c%2F6y8fs6c_processed.jpeg&w=3840&q=75)
Transcribed Image Text: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, is not eligible for either bonus depreciation or Section 179 expensing, 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 21 percent.
What will the cash flows for this project be? (Negative amounts should be indicated by a minus sign. Round your answers to 2
decimal places.)
Answer is complete but not entirely correct.
Year
1
3
FCF
71,000.00
23,859.51 O $
25,494.15 O $
40,137.07
< Prey
14 of 14
Next>
MacBook Air
DII
DD
000
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