Homework: Chapter 11 Homework Save Score: 0 of 1 pt 12 of 12 (0 complete) HW Score: 0%, 0 of 12 pts P11-24 (similar to) s Question Help 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 $51,400, 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 $75,900 and requires $4,500 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 $55,600 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 B (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 the depreciation in year 6.) c. Depict on a time line the relevant cash flows found in parts (a) and (b) associated with the proposed replacement decision. Calculate the initial investment below: (Round to the nearest dollar.) Cost of new asset Installation costs 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 $ Enter any number in the edit fields and then click Check Answer. 13 parts Clear All Check Answer remaining Larod Lha timin chinator inau LOL Data Table X P (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) New machine Old machine Expenses Expenses (excluding depreciation (excluding depreciation Year Revenue and interest) Revenue and interest) 1 $750,300 $720,400 $673,700 $659,700 2 750,300 720,400 675,700 659,700 3 750,300 720,400 679,700 659,700 4 750,300 720,400 677,700 659,700 5 750,300 720,400 673,700 659,700 Print Done i . Data Table spicauSTICCL) 3 years 10 years Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 5 years 7 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 7% 4% 6% 9 6% 10 6% 11 Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual 9% 8 4% Print Done