Evaluate the proposed acquisition of new special

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Reference no: EM131875874

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $280,000. The truck falls into the MACRS 7-year class, and it will be sold after 7 years for $28,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,800. The truck will have no effect on revenues, but it is expected to save the firm $122,000 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?

Reference no: EM131875874

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