Net cash flows Central 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 $54,100, 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 $75,000 and requires $3,800 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 $54,300 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 (Table 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. 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.) Cost of new asset $ 75,000 Year Revenue Installation costs Total cost of new asset Proceeds from sale of old asset Tax on sale of old asset Total proceeds, sale of old asset Initial cash flow b. Determine the periodic cash flows ass Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) New machine Expenses (excluding depreciation and interest) Old machine Data table Revenue Expenses (excluding depreciation and interest) (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes 1 $749,200 $720,500 $673,500 $660,500 Calculate the cash flows with the old mad Recovery year 3 years Percentage by recovery year* 5 years 7 years 2 749,200 720,500 675,500 660,500 1 33% 20% 14% 3 749,200 720,500 679,500 660,500 Year 2 45% 32% 25% 4 749.200 720,500 677,500 660,500 3 15% 19% 18% Profit before depreciation and taxes 5 749,200 720,500 673,500 660,500 4 7% 12% 12% 170/ 09/ Depreciation Net profit before taxes Taxes Print Done Net profit after taxes Print Done Operating cash inflows