What are the operating cash flows in years

Assignment Help Financial Accounting

Reference no: EM131219226

Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $20,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $5,000. The grill will have no effect on revenues but will save Johnny’s $10,000 in energy expenses. The tax rate is 35 percent.

a. What are the operating cash flows in Years 1–3?

b. What are total cash flows in Years 1–3?

c. If the discount rate is 12 percent, should the grill be purchased?

Reference no: EM131219226

Questions Cloud

Given the presumption of continuity : Continuity is often cited as basic accouting postulate that affects how a company presents information in published financial statements. How did sprouse and moonitz describe continuity? Given the presumption of continuity, if you are planning to buy..

Prepare the entry to record the fair value option : Pierre Company has a 12% note payable with a carrying value of $20,000. Pierre applies the fair value option to this note. Given an increase in market interest rates, the fair value of the note is $22,600. Prepare the entry to record the fair value o..

Discuss the standards overload problem : During the past several years, the FASB has attempted to strengthen the theoretical foundation for the development of accounting principles. Two of the most important results of this attempt are the conceptual framework project and the emerging issue..

Cost of goods manufactured for the year : Scout Company reported the following year-end information: Scout Company’s Cost of Goods Manufactured for the year is:

What are the operating cash flows in years : Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $20,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $5,000. What are the operating cas..

Why will bonuses be negatively affected : Danville Bottlers is a wholesale beverage company. Danville uses the FIFO inventory method to determine the cost of its ending inventory. Ending inventory quantities are determined by a physical count. Why will bonuses be negatively affected? What is..

Discuss the role of accounting in business : Discuss the role of accounting in business. Name one group of users of accounting information and discuss what information they might be interested in and how they might use this information. Discuss the four financial statements and how they relate ..

Describe and provide an example of an opportunity cost : Describe and provide an example of an opportunity cost. What are examples of opportunity costs that would be associated with production facilities if the manager had to make a decision on outsourcing?

Describe the characteristics of relevant costs : Describe the characteristics of relevant costs and discuss whether all relevant costs are found in accounting records. why are future costs not always relevant in decision making?

User Account

All Pages