Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $33,000 and...
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Johnnys Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $33,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $8,250. The grill will have no effect on revenues but will save Johnnys $16,500 in energy expenses per year. The tax rate is 30%. 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.) |
| Year | Operating Cash Flows |
| 1 | $ |
| 2 | |
| 3 | |
| b. | What are the total cash flows in each year? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.) |
| Time | Total Cash Flows |
| 0 | $ |
| 1 | |
| 2 | |
| 3 | |
| c. | If the discount rate is 10%, should the grill be purchased? | ||||
|
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