You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $240,000. The truck falls into the MACRS 7-year class, and it will be sold after 7 years for $24,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,400. The truck will have no effect on revenues, but it is expected to save the firm $102,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21 percent. What will the operating cash flows for this project be during year 2? Multiple Choice A. $92,923 B. $96,600 C. $43,224 D. $139,356
You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $240,000. The truck falls into the MACRS 7-year class, and it will be sold after 7 years for $24,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,400. The truck will have no effect on revenues, but it is expected to save the firm $102,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21 percent. What will the operating cash flows for this project be during year 2? Multiple Choice A. $92,923 B. $96,600 C. $43,224 D. $139,356
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $240,000. The truck falls into the MACRS 7-year class, and it will be sold after 7 years for $24,000. Use of the truck will require an increase in NWC (spare parts inventory) of $5,400. The truck will have no effect on revenues, but it is expected to save the firm $102,000 per year in before-tax operating costs, mainly labor. The firm's marginal tax rate is 21 percent. What will the operating cash flows for this project be during year 2?
Multiple Choice
A. $92,923
B. $96,600
C. $43,224
D. $139,356
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