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You have been asked by the president of your companyto evaluate the proposed acquisition of a new special purpose truckfor $50000. The truck falls into the MACRS 3 year class,and it willbe sold after three years for $19400. Use of the truck will requirean increase in NWC (spare parts inventory) of $1400. The truck willhave no effect on revenues but it is expected to save the firm$17100 per year in before tax operating costs,mainly labor. Thefirms marginal tax rate is 34 percent. What will the cash flows forthis project be?
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