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How to solve Operating cash flows Richard and Linda Thomson operate a local lawn maintenance service for commercial and residential property. They have been using
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Operating cash flows Richard and Linda Thomson operate a local lawn maintenance service for commercial and residential property. They have been using a John Deere riding mow the past several years and believe that it is time to buy a new one. They would like to know the operating cash flows associated with the replacement of the old riding mower. The follow data are available.
There are years of remaining useful life on the old mower.
The old mower has a zero book value.
The new mower is expected to last years.
The Thomsons will follow a year MACRS
Depreciable value of the new lawn mower is $
They are subject to a tax rate.
The new mower is expected to be more fuelefficlent, maneuverable, and durable than the previous models and can result in reduced operating expenses of $ per year.
The Thomsons will buy a maintenance contract that calls for annual payments of $
Create an operating cash flow statement for the replacement of Richard and Linda's John Deere riding mower. Show the operating cash flow for the next years.
Richard and Linda Thomson
Incremental Operating Cash Flows
Replacement of John Deere Riding Mower
tableReplacement of John Deere Riding Mower,YearSavings from new and improved mower,$Less: Annual maintenance cost,$Less: Depreciation,$Savings loss before taxes,$
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Data table
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Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes
tableRecovery year,Percentage by recovery year years, years, years, years
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