Net cash flowsCentral 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

$54,800,

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

$76,300

and requires

$3,600

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

$55,000

without incurring any removal or cleanup costs. The firm is subject to a tax rate of

21%.

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

LOADING...

.

(Table

LOADING...

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 cash flow associated with replacement of the old machine by the new one.

b. Determine the periodic cash flows associated with the proposed replacement. (Note: Be sure to consider the depreciation in year 6.)

c. Depict on a time line the net cash flows found in parts

(a)

and

(b)

associated with the proposed replacement decision.

Net eash flows Central Laundry and Cleaners is considering replacing an existing plece of machinery with a more sophiskeatod machine. The old machino was purchased 3 years ago at a cost of $54,800, and this amount was being depreciated under MACRS using a 5 -year tocovery period. The machine has 5 years of usabiln life remaining. The new machine that is being considered costs $76,300 and requires $3,600 in installation costs. The new machine would be deprecinted under MACRS using a 5-year recovery period. The firm can currently sell the old machine for $55.000 without incurring any removal or cleanup costa The firm is subject to a tax rate of 21\%. The revenues and expenses (excluding depreciation and interest) associated with the new and the oid machines for the next 5 years are given in the table sontains the applicable MACRS depreciation percentages.) Note: The new machine will have no terminal value at the end of 5 yesars. a. Calculate the initial cash flow associated with replecement of the cild machine by the new one. b. Detemine the periodic cash flows associated with the proposed replacement. (Note: Be sure to consider the depreciation in year 6. ) c. Deplict on a time line the net cash flows found in parts (a) and (b) associated with the proposed replacement decision. a. Calculate the initial cash flow associated with replacement of the old machine by the new one. Calculate the initial cash flow below: (Round to the nearest dollar.) k on the icon here or in order to copy the contents of the data table below into a spreadsheet.) ounded Depreciation ercentages by Recovery Year Using MACRS for irst Four Property Classes These percentages have been rounded to the nearest whole percent to simplify calculations while etaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual inrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year :onvention. Net cash flows Central Laundry and Cleaners is considering replacing an existing piece of machinery With a miora boptiticatiol purchased 3 years ago at a cost of $54,800, and this amount was being depreciated under MACRS using a 5 -year recovery petiod life remaining. The new machine that is being considered costs $76,300 and requires $3,600 in instaltabion costs. The new machirs Data table (Click on the lcon here in order to copy the contents of the data table below into a spreadsheet.)