Looking for help working problem 8-16 in Corporate Finance - Linking Theory to What Companies Do

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272,000 264,000 300,000 264,000 288,000 271,000 300,000 288,000 270,000 264,000 Calculate the initial cash outflow associated with replacement of the old oven a. the new one. b. Determine the incremental cash flows associated proposed replacement with the Be sure to consider the depreciation in year 6 C. a line, depict the relevant cash flows found in parts (a) and (b) associated with the proposed replacement decision. 8-16 Wash is of new high-speed replace the existi washer. ago at an installed The existing washer was purchased two years 5-year recovery cost of $120,000; it was being depreciated under MACRS using a more period. The existing washer is expected to have ausable life of five years. The new washer costs $210,000 and requires $10,000 in installation costs 5-year usable life and would be depreciated under MACRS using a 5-year recovery period. The existing washer can currently be sold for $140,000 without incurring any removal or cleanup costs. To support the increased business resulting from purchase of the new washer, accounts receivable would increase by $80,000, inventories by $60,000, and accounts payable by $116,000. At the end of five years, the existing washer is expected to have a market value of zeroi the new washer could be sold to net $58,000 after removal and cleanup costs and before taxes. The firm pays taxes at a rate of 40% on both ordinary income and capital gains. The estimated profits before depreciation and taxes over the five years, for both the new and the existing washer, are shown in the following table Profits before Depreciation and Taxes Existing Washer Year New Washer $52,000 $86,000 48,000 86,000 44,000 86,000 0,000 86,000 36,000 86,000 a. Calculate the initial cash outflow associated with the replacement of the existing washer with the new one. termine the incremental cash flows associated with the proposed washer acement. Be sure to consider the depreciation in year 6 Determine the terminal cash flow expected at the end of year 5 from the proposed washer replacement. time line, depict the relevant cash flows associated with the proposed d