You have been asked by the president of your company to evaluate the proposed ac
ID: 2710245 • Letter: Y
Question
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $130,000. The truck falls into the MACRS 10-year class, and it will be sold after 10 years for $13,000. Use of the truck will require an increase in NWC (spare parts inventory) of $4,300. The truck will have no effect on revenues, but it is expected to save the firm $53,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 40 percent. What will the cash flows for this project be during year 2? $41,160 $55,200 $29,600 $48,700
Explanation / Answer
What will the cash flows for this project be during year 2 is 41160
Particulates Year 2 Savings In operating Cost 53000 Depreciation 130000*0.18 23400 Operating Profit 29600 Tax 11840 After tax 17760 ADD depreciation 23400 Cash Flow 41160Related Questions
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