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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
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 $2,060 in Year 1;$3,296 in Year 2; $1,957 in Year 3; $1,236 in both Year 4 and Year 5, and $515 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 inffows 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 infiows calculated in part b. a. Calculate the operating cash inflows associated with the new lathe below: (Round to the nearest dollar.) Data table (Click on the icon here P in order to copy the contents of the data table below into a spreadsheet.)
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