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Question Help Relevant cash flows-No terminal valueCentral Laundry and Cleaners is considering replacing an existing piece of machinery with a more sophisticated machine. The old machine was purchased 3 years ago at a cost of $45,400, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable ife remaining. The new machine that is being considered costs $75,600 and requires $3,600 in installation costs. The new machine would be depreciated under MACRS using a 5-year recovery period. The firm can currently sell the old machine for $56,000 without incurring any removal or cleanup costs. The firm is subject to a tax rate of 40%. The revenues and expenses (excluding depreciation and interest) associated with the new and the old machines for the next 5 years are given in the table m (Table M contains the applicable MACRS depreciation percentages.) Note: The new machine will have no terminal value at the end of 5 years. a. Calculate the initial investmennt associated with replacement of the old machine by the new one. b. Determine the incremental operating cash inflows associated with the proposed replacement. (Note: Be sure to consider the depreciation in year 6.) e. Depict on a time line the relevant cash fows found in parts (a) and (b) associated with the proposed replacement decision. a. Calculate the initial investment associated with replacement of the old machine by the new one. Calculate the initial investment below: (Round to the nearest dollar.) Cost of new asset Installation oosts Total cost of new asset Proceeds from sale of old asset Tax on sale of old asset Total proceeds, sale of old asset Initial investment Relevant cash flowsNo terminal value Central Laundry and Cleaners is considering replacing an existing piece of machinery with a more sophisticated machine. The old machine was purchased 3 years ago at a cost of $45,400, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable ife remaining. The new machine that is being considered costs $75,600 and requires $3,600 in installation costs. The new machine would be depreciated under MACRS using a 5-year recovery period. The firm can currendy sell the old machine for $56,000 without incuming any removal or ceanup costs. The firm is subject to a tax rate of 40%. The revenues and expenses (excluding depreciation given in the table . (Table contains the applicable MACRS depreciation percentages.) Note: The ne a. Calculate the intial investment associated with replacement of the old machine by the new one. b. Determine the incremental operating cash infows associated with the proposed replacement. (Note: Be c. Depict on a time line the relevant cash flows found in parts (a) and (b) associated with the proposed repla Data Table spreaosneer a. Caloulate the initial investment associated with replacement of the old machine by the new one. Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Data Table Percentage by recovery year S years 3 years 33% Recovery year 7 years 10 years 20% 14% 25% 18% 12% 45% 15% 7% on the lcon looated on the top-right comer of the data table below in order to copy its contents into a spreadst 18% 14% 12% 19% 12% 12% 5% New machine Old machine Expenses (excluding depreciation Expenses 9% 9% (excluding depreciatio 8% Year Revenue and interest) $719.700 Revenue $674.500 and interest) S660.200 659 200 6% $749,200 749 200 0% 719,700 719.700 719,700 676,500 680,500 678,500 674,500 10 6% 749 200 749.200 659.200 659,200 659,200 11 4. Totais 100% 100% 100% 100% 749,200 719,700 "These percentages have been rounded to the nearest whole percent to simplify calculatons while retaining realism. To caloulate the actual depreciation for tax purposes, be sure to apply tthe actual unrounded percentages or directly apply double-declining balance (200%) depreciaton using the half-y convention. Print Done