P11-19 (similar to) Assigned Media : Question Help Operating cash flows 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 $2,260 in Year 1; $3,616 in Year 2; $2,147 in Year 3; $1,356 in both Year 4 and Year 5, and $565 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 tables . The firm is subject to a 40% tax rate on ordinary income. a. Calculate the operating cash flows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) b. Calculate the operating cash flows resulting from the proposed lathe replacement. c. Depict on a time line the incremental operating cash flows calculated in part b. i X - Data Table Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes $ A A (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Depreciation Net profit before taxes A Taxes A Net profit after taxes Year Operating cash flows New Lathe Expenses (excluding depreciation and interest) $28,500 28,500 28,500 28,500 28,500 Revenue $38,500 39,500 40,500 41,500 42,500 A Old Lathe Expenses (excluding depreciation and interest) $24,800 24,800 24,800 24,800 24,800 Revenue $34,700 34,700 34,700 34,700 34,700 Enter any number in the edit fields and then click Check Answer. 13 Pemaining e Print Done