Johnny’s Lunches is considering purchasing a new, energy-efficient grill. The grill will cost $46,000 and will be depreciated according to the 3-year MACRS schedule. It will be sold for scrap metal after 3 years for $11,500. The grill will have no effect on revenues but will save Johnny’s $23,000 in energy expenses per year. The tax rate is 35%. Use the MACRS depreciation schedule.
a. What are the operating cash flows in each year?
b. What are the total cash flows in each year?