Evaluate the proposed acquisition of a new special-purpose

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Reference no: EM133502619

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 three-year class, is not eligible for either bonus depreciation or Section 179 expensing and will be sold after three years for $20,000. Use of the truck will require an increase in NWC (spare parts inventory) of $2,000. The truck will have no effect on revenues, but it is expected to save the firm $20,000 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? (Make a schedule that includes subtotals for EBIT, net income, OCF, and Free Cash Flows.)

Reference no: EM133502619

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