Energy-efficient grill-what are the operating cash flows

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Reference no: EM131025857

Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $49,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $12,250. The grill will have no effect on revenues but will save Johnny’s $24,500 per year in energy expenses. The tax rate is 30%. Use MACRS depreciation schedule.

A. What are the operating cash flows in years 1 to 3? (Do not round intermediate calculations. Round your answers to 2 decimal places.)

B. What are total cash flows in years 1 to 3? (Negative amounts should be indicated by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)

If the discount rate is 12%, should the grill be purchased?

Reference no: EM131025857

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