Incremental operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that will last 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,320 in Year 1; $3,712 in Year 2; $2,204 in Year 3; $1,392 in both Year 4 and Year 5. The firm estimates the revenues and expenses (excluding depreciation) for the new and the old lathes to be as shown in the following table. The firm is subject to a 40% tax rate on ordinary income. a. Calculate the operating cash inflows associated with each lathe. b. Calculate the incremental (relevant) operating cash inflows resulting from the proposed lathe replacement. c. Depict on a time line the incremental operating cash inflows calculated in part b. a. Calculate the operating cash inflows as Year Revenue Expenses (excluding depreciation an Profit before depreciation and taxes Depreciation Net profit before taxes Taxes Net profit after taxes Operating cash flows (Round to the nearest dollar.) Year Revenue Expenses (excluding depreciation an Profit before depreciation and taxes Depreciation Data table (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 Lathe Year 1 2 3 4 5 4 Revenue $40,600 41,600 42,600 43,600 44,600 Expenses (excluding depreciation and interest) $30,000 30,000 30,000 30,000 30,000 Print Revenue $33,400 33,400 33,400 33,400 33,400 Done Old Lathe Expenses (excluding depreciation and interest) $24,300 24,300 24,300 24,300 24,300 X a. Calculate the operating cash inflows associated with the new lathe below: (Round to the nearest dollar.) Year Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes Depreciation Net profit before taxes Taxes Net profit after taxes Operating cash flows (Round to the nearest dollar.) GA GA GA $ A GA 1 Year Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes Depreciation Net profit before taxes Taxes Net profit after taxes Operating cash flows (Round to the nearest dollar.) GA GA FA GA $ ff 2 Year Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes Depreciation Net profit before taxes Taxes Net profit after taxes Operating cash flows (Round to the nearest dollar.) Voar GA GA $ LA EA 3 Year Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes Depreciation Net profit before taxes Taxes Net profit after taxes Operating cash flows (Round to the nearest dollar.) $ $ $ GA SA GA $ $ $ 4 Year Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes Depreciation Net profit before taxes Taxes Net profit after taxes Operating cash flows GA GA A GA SA $ EA 5 Year Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes GA GA GA GA Depreciation Net profit before taxes Taxes Net profit after taxes Operating cash flows Calculate the operating cash inflows associated with the old lathe below: (Round to the nearest dollar.) ff Year Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes Depreciation Net profit before taxes Taxes Net profit after taxes Operating cash flows $ $ $ 1-5 b. Calculate the incremental (relevant) operating cash inflows resulting from the proposed lathe replacement. Calculate the incremental (relevant) operating cash inflows resulting from the proposed lathe replacement below: (Round to the nearest dollar.) New Lathe Old Lathe Year Incremental Cash Flows (Round to the nearest dollar.) New Lathe Old Lathe Year Incremental Cash Flows (Round to the nearest dollar.) GA GA $ 1 2 New Lathe Old Lathe Incremental Cash Flows Year (Round to the nearest dollar.) New Lathe Old Lathe Year Incremental Cash Flows New Lathe Old Lathe (Round to the nearest dollar.) Year Incremental Cash Flows (Round to the nearest dollar.) GA $ $ $ GA $ $ 3 4 5 New Lathe Old Lathe Incremental Cash Flows O A. Year Cash flow c. Depict on a time line the incremental operating cash inflows calculated in part b. (Select the best choice below.) B. Year Year Cash flow O C. Year Year Year Year Cash flow $1,828 0 GA $1,828 0 $7,288 0 6 $2,985 1 $2,985 1 $8,445 1 $2,982 2 $2,982 2 $8,442 2 $3,257 3 $3,257 3 $8,717 3 $3,857 4 $3,857 4 $9,317 4 $0 LO 5 $0 5 $0 5 6 6 6 Instructor tip 1)Operating cash flows = cash revenues - cash operating expenses - taxes. 2)All amounts for year 6 should be zero. This is leftover from when the problem used MACRS depreciation. 3)To check the incremental cash flows, see if they agree with any of the amounts on the timelines in part c. 4)In part c, the cash flows are all off by one period to the left, and the program won't let me fix this. For the correct answer, assume the timelines are shifted one period to the right. -