how do i get the annual net cash inflow from operations? pg 2

Max Chips is a manufacturer of prototype chips based in Buffalo, New York. (Click the icon to view the prototype chips information.) 2 (Click the icon to view information on the options.) Present Value of $1 table? Present Value of Annuity of S1 table Future Value of $1 tobla Future Value of Annuity of 51 table Read the requirements? Capital budgeting is the process of making long-run planning decisions for investments in projects. In much of accounting. income is calculated on a period-by-period basis. In choosing investments, however, managers make a selection from among a group of multiple projects, each of which may span several periods. To make capital budgeting decisions, managers analyze each project by considering all the life-span cash flows from its initial investment through its termination. The net present value (NPV) method calculates the expected monetary gain or loss from a project by discounting all expected futuro cash inflows and outflows back to the present point in time using the required rate of return. Requirements 1 and 2. Sketch the after-tax cash inflows and outflows of the modernize and replace alternatives over the 2018 to 2024 period and calculate the net present value for each alternative. In this problem, the company is evaluating two alternative to increase the capacity of its production. In order to compute the NPV, we must isolate, and then account for the multiple streams of cash inflows and outflows that are expected to result from the purchase. The cash inflows and outflows associated with each alternative has been provided, we will need to factor the income tax effect on those cash flows. Let's begin with the modernizo alternative. Under this alternative, the company must incur $37,100,000 for the modernization of the equipment. This cash outflows occurs on day one of the investment period, hence, the amount is already reported at its present value The investment will produce three sources of net cash inflows over its expected life: (1) annual net cash contributions from the sale of the prototype chips, (2) income tax cash savings from annual depreciation taken on the equipment, and (3) proceeds from the sale of the equipment at the end of its seven-year life. Max Chips is a tax-paying entity, so we must take into account how income taxes affect certain cash flows generated by the investment. Let's start by examining the operating net cash inflows generated by the equipment. The annual operating net cash inflows for the investment period has been provided in the problem statement. We are also told that Max Chips has a 50% income tax rate. Using the information provided, we must compute the after-tex operating net cash inflows from the investment. Let's compute these amounts now. Annual net cash Inflow Dec 31, 2018 Dec 31, 2019 from operations $ 9,835,000 10,710,000 X Annual after-tax net cash inflows from operations $ 4,917,500 5,355,000 * (100% - Tax rate) (100-50%) (100 - 50%) group of mumpre projects, each of which may span several ponos. To make capital budgeting decisions, managers anaye each project by considering all the life-span cash flows from its initial investment through its termination. The net present value (NPV) method calculates the expected monetary gain or loss from a project by discounting all oxpected future cash inflows and outflows back to the present point in time using the required rate of return Requirements 1 and 2. Sketch the after-tax cash inflows and outflows of the modernize and replace alternatives over the 2018 to 2024 period and calculate the net present value for each alterative In this problem, the company is evaluating two alternative to increase the capacity of its production. In order to compute the NPV, we must isolate, and then account for the multiple streams of cash inflows and outflows that are expected to result from the purchase. The cash inflows and outflows associated with each alternative has been provided, we will need to factor the Income tax effect on those cash flows. Let's begin with the modernize alternative. Under this alternative, the company must incur $37,100,000 for the modernization of the equipment. This cash outflows occurs on day one of the investment period, hence, the amount is already reported at its present value. The investment will produce three sources of net cash inflows over its expected life: (1) annual net cash contributions from the sale of the prototype chips. (2) income tax cash savings from annuel depreciation taken on the equipment, and (3) proceeds from the sale of the equipment at the end of its seven-year life. Max Chips is a tax-paying entity, so we must take into account how income taxes affect certain cash flows generated by the Investment. Let's start by examining the operating net cash inflows generated by the equipment. The Annualorarating net.cash inflows for the investment period has been provided in the problem statement. We are also told that Max Chips has a 50% income tax rate. Using the information provided, we must compute the after-tax operating net cash inflows from the investment. Let's compute these amounts now. Annual net cash inflow Annual after-tax net cash from operations * (100% Tax rate) inflows from operations Dec 31, 2018 $ 9,835,000 X (100-50%) $ 4,917,500 Dec 31, 2019 10,710,000 (100 - 50%) 5,355,000 Dec 31, 2020 11,585,000 (100 - 50%) 5,792,500 Dec 31, 2021 12,460,000 (100-50%) 6,230,000 Dec 31, 2022 13,335.000 (100-50%) 6,667,500 Dec 31, 2023 14,210,000 (100-50%) 7,105,000 Dec 31, 2024 15,085,000 (100 - 50%) 7,542,500 X X X Next, let's look at the second source of net cash inflows, the income tax cash savings from the annual depreciation taken on the equipment. Remember that the annual depreciation is calculated by dividing the cost of an asset by its useful life. A tax-paying entity pays taxes on the operating income generated from an investment, but it also saves money in taxes from the additional mankanunne Inrences the because of the time-value of dollars. It is more advantageou 1: More Info Next year, in 2018, Max Chips expects to deliver 562 prototype chips at an average price of $82,000. Max Chips' marketing vice president forecasts growth of 50 prototype chips per year through 2024. That is, demand will be 562 in 2018, 612 in 2019, 662 in 2020, and so on. The plant cannot produce more than 537 prototype chips annually. To meet future demand, Max Chips must either modernize the plant or replace it. The old equipment is fully depreciated and can be sold for $4,400,000 if the plant is replaced. If the plant is modernized, the costs to modernize it are to be capitalized and depreciated over the useful life of the updated plant. The old equipment is retained as part of the modernize alterative. $ $ 2: Data Table The following data on the two options are available: Modernize Replace Initial investment in 2018 37,100,000 $ 61,700,000 Terminal disposal value in 2024 7,000,000 $ 16,500,000 Useful life 7 years 7 years Total annual cash operating cost per prototype chips 44,500 $ 37,000 Max Chips uses straight-line depreciation, assuming zero terminal disposal value. For simplicity, we assume no change in prices or costs in future years. The investment will be made at the beginning of 2018, and all transactions thereafter occur on the last day of the year. Max Chips' required rate of return is 16%. There is no difference between the modernize and replace alternatives in terms of required working capital. Max Chips pays a 50% tax rate on all income. Proceeds from sales of equipment above book value are taxed at the same 50% rate. 3: Reference