1 Pilsudski Coal Company is considering the replacement of two machines that are three years old with a new, more efficient machine. The two old machines could be sold currently for a total of $70,000 in the secondary market, but they would have a zero final salvage value if held to the end of their remaining useful life. Their original depreciable basis totaled $300,000. They have depreciated tax book value of $86,400, and a remaining useful life of eight years. MACRS depreciation is used on these machines, and they are five-year property class assets. The new machine can be purchased and installed for $480,000. It has a useful life of eight years, at the end of which a salvage value of $40,000 is (depreciation) purposes. Owing to its greater efficiency, the new machine is expected to result in incremental annual operating savings of $100,000. The company's corporate tax rate is 40 percent, and if a loss occurs in any year on the project, it is assumed that the company can offset the loss against other company income. Required: What are the incremental cash inflows over the eight years, and what is the incremental cash outflow at time 0? Q.2 The Fresno Finial Fabricating Works is considering automating is existing finial casting and assembly department. The plant manager, Mel Content, has accumulated the following information for you: The automation proposal would result in reduced labor costs of $150,000 per year. The cost of defects is expected to remain at $5,000 even if the new automation proposal is accepted. New equipment costing $500,000 would need to be purchased. For financial reporting purposes, the equipment will be depreciated on a straight-line basis over its useful four-year life. For tax purposes, however, the equipment falls into the three-year property class and will be depreciated using the MACRS depreciation percentages. The estimated final salvage value of the new equipment is $50,000. Annual maintenance costs will increase from $2,000 to $8,000 if the new equipment is purchased. The company is subject to a marginal tax rate of 40 percent. Required: What are the relevant incremental cash inflows over the proposal's useful life, and what is the incremental cash outflow at time 0? Q.3 The City of San Jose must replace a number of its concrete-mixer trucks with new trucks. It has received two bids and has evaluated closely the performance characteristics of the various trucks. The Rockbuilt truck, which costs $74,000, is top-of-the-line equipment. The truck has a life of eight years, assuming that the engine is rebuilt in the firth year. Maintenance costs of $2,000 a year are expected in the first four years, followed by total maintenance and rebuilding costs of $13,000 in the fifth year. During the last years, maintenance costs are expected to be $4,000 a year. At the end of eight years, the truck will have an estimated scrap value of $9,000. A bid from Bulldog Trucks, Inc. is for $59,000 a truck. Maintenance costs for the truck will be higher. In the first year, they are expected to be $3,000, and this amount is expected to increase by $1,500 a year through the eighth year. In the fourth year, the engine will need to be rebuilt, and this will cost the company $15,000 in addition to maintenance costs in that year. At the end of eight years, the Bulldog truck will have an estimated scrap value of $5,000. Required: What are the relevant cash flows related to the trucks of each bidder? Ignore tax considerations because the City of San Jose pays no taxes