Problem:
Johnny's Lunches is considering purchasing a new, energy efficient grill. The grill will cost $20,000 and will be depreciated in an asset class that carries a CCA rate of 30%. It will be sold for scrap metal after 3 years for $5000. THe grill will have no effect on revenues but will save Johnny's $10000 in energy expenses. The firm has other assets in this asset class. The tax rate is 35%.
Required:
Question 1: What are the operating cash flows in years 1 to 3?
Question 2: What are total cash flows in years 1 to 3?
Question 3: If the discount rate is 12%, should the grill be purchased?
Note: Please show basic calculation