502 PART FIVE LUNG ering purchasing a LG6 P11-19 Operating cash flows Strong Tool Company has been conside lathe to replace a fully depreciated lathe that would otherwise lad new lathe is expected to have a 5-year life and depreciation charge 1; $3,200 in year 2; $1,900 in year 3; $1,200 in both year 4 and year year 6. The firm estimates the revenues and expenses (excluding depre interest) for the new and the old lathes to be as shown in the table bele subject to a 40% tax rate. erwise last 5 more years. The charges of $2,000 in years 4 and year 5; and $500 in ding depreciation and able below. The firm's Year Revenue $40,000 41,000 42,000 43,000 44,000 New lathe Expenses (excluding depreciation and interest) $30,000 30,000 30,000 30,000 30,000 Old lathe Expenses (excluding depreciatice and interest) $25,000 25,000 25,000 25,000 25,000 Revenue $35,000 35,000 35,000 35,000 35,000 3 a. Calculate the operating cash flows associated with each lathe. (Note: Bes consider the depreciation in year 6.) b. Calculate the operating cash flows resulting from the proposed at c. Depict on a timeline the operating cash flows calculated in part 1 P11-20 Operating cash infl. n the proposed lathe replacement LG6