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What are the total cash flows in each year

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Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $44,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $11,000. The grill will have no effect on revenues but will save Johnny's $22,000 in energy expenses. The tax rate is 30%.

Required:

a. What are the operating cash flows in each year?

b. What are the total cash flows in each year?

c. Assuming the discount rate is 11%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased?

A. What are the operating cash flows in each year? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

Year. Operating Cash Flows

1
2
3

B. What are the total cash flows in each year? (Negative amounts should be indicated with a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

Time Total Cash Flows

0
1
2
3

Assuming the discount rate is 11%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

NPV of cash flow stream

Should the grill be purchased?

Reference no: EM132543495

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