am. 121. Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $37,000 and will be depreciated straight-line over 3 years. It will be sold for scrap metal after 5 years for $9,250. The grill will have no effect on revenues but will save Johnny's$18,500 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?Complete this question by entering your answers in the tabs below.Required ARequired B Required CWhat are the operating cash flows in each year?Note: Do not round intermediate calculations. Round your answers to 2 decimal places.Year01Operating CashFlows2345

Cash Flow refers to payments made into or out of a business, project, or financial product.

Answered: Johnny's Lunches is considering…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Johnny's Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $43,000 and will be depreciated straight- line over 3 years. It will be sold for scrap metal after 5 years for $10,750. The grill will have no effect on revenues but will save Johnny's $21,500 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 12%, calculate the net present value (NPV) of the cash flow stream. Should the grill be purchased? Complete this question by entering your answers in the tabs below. Required A Required B Required C 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
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