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Assume that it is January 1, 2022 and that the Mendoza Company is considertng the replacement of a machine that has been used for the past 3 years in a special project for the company. This project is expected to continue for an additional 5 years (te, until the end of 2026). Mendoza will either keep the existing machine for another 5 years (8 years total) or replace the existing machine now with a new model that has a 5-year estimated life. Pertinent facts regarding this decision are as follows: Keep Existing Machine Purchase New Machine Purchase price of machine (including transportation, setup charges, etc.) 5 170,000 $ 210,000 Useful life (determined at tine of acquisition) years 5 years Estimated salvage value, end of 2026 $ 22,000 5. 27,000 Expected cash operating costs, per year: Variable (per unit produced/sold) $ 0.45 $ 0.39 Fixed costs (total) $ 27,000 $ 26,000 Estimated salvage (terminal) values: January 1, 2022 $ 70,000 December 31, 2026 $ 15,000 $ 26,000 Net working capital committed at Line of acquisition of existing machine (all fully recovered at end of project, December 31, 2026) $32,000 Incremental networking capital required if new machine is purchased on January 1, 2022 (all fully recovered at end of project. December 31, 2026) $ 12,00 Expected and volume of output/sales (in units), over the period 2022 to 2026 520.000 520,000 *Note: These amounts are used for depreciation calculations Assume further that Mendoza is subject to a 40% Income tax, for both ordinary income and gains/losses associated with disposal of machinery, and that all cash flows occur at the end of the year, except for the initial Investment Assume that straight-line depreciation is used for tax purposes and that any tax associated with the disposal of machinery occurs at the same time as the related transaction Required: 1 Determine relevant cash flows (after-tax) at the time of purchase of the new machine (.e, timo O. January 1, 2022). 2 Determine the relevant (after-tax) cash inflow each year of project operation (te, at the end of each of years 1 through 5). 3. Determine the relevant (after-tax) cash Inflow at the end of the project's life (te, at the project's disposal time, December 31, 2026) 5. Determine the undiscounted net cash flow (after tax) for the new machine and determine whether, on this basis, the old machine should be replaced (For all requirements, do not round Intermediate calculations round your answers to the nearest whole dollar amount) Net cash flow (atter), time of purchase point) 2. Net cash inflow strax), during the project operation $ $ 13 380 AAR Keep Existing Machine Purchase New Machine $ 170, eee 8 years $ 22,00 $ 210,000 5 years $ 27,000 $ 0.45 $ 27,000 $ 0.39 $ 26,009 Purchase price of machine (including transportation, setup charges, etc.) Useful life (determined at time of acquisition) Estimated salvage value, end of 2026 Expected cash operating costs, per year: Variable (per unit produced/sold) Fixed costs (total) Estimated salvage (terminal) Values January 1 2022 December 31, 2026 Net working capital committed at time of acquisition of existing machine (all fully recovered at end of project, December 31, 2026) Incremental networking capital required if new machine is purchased on January 1, 2022 (all fully recovered at end of project, December 31, 2026) Expected annual volume of output/sales (in units), over the period 2022 to 2026 $ 70,000 $ 15,000 $ 26,eee $ 32,000 $ 12,000 520,000 520,000 "Note: These amounts are used for depreciation calculations. Assume further that Mendoza is subject to a 40% Income tax, for both ordinary Income and gains/losses associated with disposal of machinery, and that all cash flows occur at the end of the year, except for the initial Investment Assume that straight-line depreciatic is used for tax purposes and that any tax associated with the disposal of machinery occurs at the same time as the related transactic Required: 1. Determine relevant cash flows (after-tax) at the time of purchase of the new machine (1.e., time 0: January 1, 2022). 2 Determine the relevant (after-tax) cash inflow each year of project operation (le, at the end of each of years 1 through 5). 3. Determine the relevant (after-tax) cash Inflow at the end of the project's life (l.e. at the project's disposal Ume, December 31, 2026 5. Determine the undiscounted net cash flow (after tax) for the new machine and determine whether on this basis, the old machine should be replaced (For all requirements, do not round Intermediate calculations. round your answers to the nearest whole dollar amount.) 13 1. Net cash flow after-tax) time 0 .e at purchase point) 2. Net cash inflow after-tax), during the project operation 3. Net cash inflow (altera at the end of the project's life 6 Undiscounted net cash flow after tax) for the new machine 306 S $ $ TS 8,600 505