Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $43,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 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%. Use the MACRS depreciation schedule.
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 by a minus sign. Do not round intermediate calculations. Round your answers to 2 decimal places.)
Time Total Cash Flows
0 $
1 $
2 $
3 $
c. If the discount rate is 12%, should the grill be purchased? Yes or No