Operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that would otherwise last 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,000 in Year 1; $3,200 in Year 2; $1,900 in Year 3; $1,200 in both Year 4 and Year 5, and $500 in Year 6. The firm estimates the revenues and expenses (excluding depreciation and interest) 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. (Note: Be sure to consider the depreciation in year 6.) b. Calculate the 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 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 $ 1 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 Old Lathe Expense:s (excluding depreciation and interest) $30,000 30,000 30,000 30,000 30,000 Expense:s (excluding depreciation and interest) $25,000 25,000 25,000 25,000 25,000 Year Revenue $40,000 41,000 42,000 43,000 44,000 Revenue $35,000 35,000 35,000 35,000 35,000 2 4 rint Done Operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that would otherwise last 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,000 in Year 1; $3,200 in Year 2; $1,900 in Year 3; $1,200 in both Year 4 and Year 5, and $500 in Year 6. The firm estimates the revenues and expenses (excluding depreciation and interest) 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. (Note: Be sure to consider the depreciation in year 6.) b. Calculate the 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 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 $ 1 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 Old Lathe Expense:s (excluding depreciation and interest) $30,000 30,000 30,000 30,000 30,000 Expense:s (excluding depreciation and interest) $25,000 25,000 25,000 25,000 25,000 Year Revenue $40,000 41,000 42,000 43,000 44,000 Revenue $35,000 35,000 35,000 35,000 35,000 2 4 rint Done