Evaluate proposed acquisition of a new special-purpose truck

Reference no: EM131935606

Question: You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $110,000. The truck falls into the MACRS 5-year class, and it will be sold after 5 years for $11,000. Use of the truck will require an increase in NWC (spare parts inventory) of $4,100. The truck will have no effect on revenues, but it is expected to save the firm $51,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 35 percent. What will the cash flows for this project be during year 2?

Reference no: EM131935606

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