Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $37,000 and...
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Accounting
Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $37,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $9,250. The grill will have no effect on revenues but will save Johnnys $18,500 in energy expenses per year. The tax rate is 40%. Use the MACRS depreciation schedule.
a. What are the operating cash flows in each year? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
b. What are the total cash flows in each year? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
c. Assuming the discount rate is 11%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
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