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, is not eligible for either bonus depreciation or Section 179 expensing, and it will be sold after three years for $19,200. Use of the truck will require an increase in NWC (spare parts inventory) of $1,200. The truck will have no effect on revenues, but it is expected to save the firm $20,600 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? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Answer is complete but not entirely correct. Year 0 1 2 3 FCF $ (61,200.00) S 16,274 00 S 16,274 00 S 31,442.00 X
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, is not eligible for either bonus depreciation or Section 179 expensing, and it will be sold after three years for $19,200. Use of the truck will require an increase in NWC (spare parts inventory) of $1,200. The truck will have no effect on revenues, but it is expected to save the firm $20,600 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? Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places. Answer is complete but not entirely correct. Year 0 1 2 3 FCF $ (61,200.00) S 16,274 00 S 16,274 00 S 31,442.00 X
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter11: Depreciation, Depletion, Impairment, And Disposal
Section: Chapter Questions
Problem 13P
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
$60,000. 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 $19,200. Use of the truck will require an increase in NWC (spare parts inventory) of $1,200. The truck will
have no effect on revenues, but it is expected to save the firm $20,600 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?
Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.
Answer is complete but not entirely correct.
Year
0
1
2
3
FCF
$
(61,200.00)
S
16,274 00 S
16,274 00 S
31,442.00 X](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd1f1eed4-2a6b-4e96-8e73-13c4c3092195%2Fec8c26c8-64fb-402a-84a9-418ad04f7cd1%2Fl0shfqs_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
$60,000. 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 $19,200. Use of the truck will require an increase in NWC (spare parts inventory) of $1,200. The truck will
have no effect on revenues, but it is expected to save the firm $20,600 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?
Note: Negative amounts should be indicated by a minus sign. Round your answers to 2 decimal places.
Answer is complete but not entirely correct.
Year
0
1
2
3
FCF
$
(61,200.00)
S
16,274 00 S
16,274 00 S
31,442.00 X
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