Problem
Bobby Jones, the club pro at Pebble Beach Golf Club, is considering replacing his fleet of golf carts. He bought the existing fleet of 115 EZ-GO carts two years ago for $2,000 per cart. He is considering replacing them with a new model Club Car. Each Club Car has a GPS, a cooler, and a ball/club cleaner. Each Club Car costs $2,800. The carts are in Class 43 with a 30% depreciation rate. If he sold the EZ-GO carts today he could get $730 for each cart. One advantage of buying the new carts is that they are more durable and so Bobby can carry a smaller inventory of spare parts. Bobby figures his inventory will drop by $25,600. If Bobby goes ahead with the golf cart replacement, what are the initial cash flows? Assume a tax rate of 35%.