Homework: HW #19- Chapter 11B Save Score: 0 of 10 pts 4 of 5 (2 complete) HW Score: 30.77%, 12 of 39 pts P11-16 (similar to) 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 $52,200, 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 $75,000 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 $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 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. 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.) - X Data Table Cost of new asset Installation costs (Click on the icon here e in order to copy the contents of the data table below into a spreadsheet.) Total cost of new asset Proceeds from sale of old asset $ Tax on sale of old asset Year Enter any number in the edit fields and then click Check Answer. 1 2 3 4 5 Revenue $749,500 749,500 749,500 749,500 749,500 New machine Expenses (excluding depreciation and interest) $719,700 719,700 719,700 719,700 719,700 Revenue $673,100 675, 100 679,100 677,100 673,100 Old machine Expenses (excluding depreciation and interest) $659,600 659,600 659,600 659,600 659,600 parts remaining 10 years mirst roul 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% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 11 496 Totals 100% 100% 100% 10096 *These percentages have been intinderit the rest le naranta implifu pallatione while leads id mas les
