Evaluate the proposed acquisition of new special

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Reference no: EM131069086

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $20,200. Use of the truck will require an increase in NWC (spare parts inventory) of $2,200. The truck will have no effect on revenues, but it is expected to save the firm $23,500 per year in before-tax operating costs, mainly labor. The firm’s marginal tax rate is 34 percent.

What will the cash flows for this project be? (FCF for year 0, 1, 2, and 3)?

Reference no: EM131069086

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