A-C

P11-16 (similar to) Is Question Help 0 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 $54,200, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable life remaining. The new machine that is being considered costs $77,000 and requires $3,700 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 $55, 100 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 (Table 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 investment 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 th Data Table c. Depict on a time line the relevant cash flows found in parts (a) and (b) associated with the proposed replacement decision. Data Table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) 10 years Year 1 2 3 4 5 Revenue $749,700 749.700 749.700 749.700 749,700 New machine Expenses (excluding depreciation and interest) $720,200 720,200 720,200 720,200 720,200 Revenue $673.400 675,400 679,400 677,400 673,400 Old machine Expenses (excluding depreciation interest) $660,600 660,600 660,600 660,600 660,600 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 11 Totals 100% 100% 100% 100% *Thaco srostans bous hoon raunded to the sonowbolo sorant ta simplifu aslistico subila Print Done JUI 26 O 2 0 W P11-16 (similar to) Is Question Help 0 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 $54,200, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable life remaining. The new machine that is being considered costs $77,000 and requires $3,700 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 $55, 100 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 (Table 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 investment 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 th Data Table c. Depict on a time line the relevant cash flows found in parts (a) and (b) associated with the proposed replacement decision. Data Table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) 10 years Year 1 2 3 4 5 Revenue $749,700 749.700 749.700 749.700 749,700 New machine Expenses (excluding depreciation and interest) $720,200 720,200 720,200 720,200 720,200 Revenue $673.400 675,400 679,400 677,400 673,400 Old machine Expenses (excluding depreciation interest) $660,600 660,600 660,600 660,600 660,600 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 11 Totals 100% 100% 100% 100% *Thaco srostans bous hoon raunded to the sonowbolo sorant ta simplifu aslistico subila Print Done JUI 26 O 2 0 W