You Have Been Asked by the President of Your Company

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $70,000.The truck falls into the MACRS three-year class,and it will be sold after three years for $5,000.Use of the truck will require an increase in NWC (spare parts inventory) of $10,000.The truck will have no effect on revenues,but it is expected to save the firm $32,000 per year in before-tax operating costs,mainly labor.The firm's marginal tax rate is 40 percent.What will the operating cash flow for this project be during year 2?

A) $531
B) $885
C) $31,646
D) $50,315