Part 1 OT 5 Operating cash flows Richard and Linda Thomson operate a local lawn maintenance service for commercial and residential property. They have been using a John Deere riding mower for the past several years and believe that it is time to buy a new one. They would like to know the operating cash flows associated with the replacement of the old riding mower. The following data are available. 1. There are 5 years of remaining useful life on the old mower. 2. The old mower has a zero book value. 3. The new mower is expected to last 5 years. 4. The Thomsons will follow a 5-year MACRS recovery period for the new mower. 5. Depreciable value of the new lawn mower is $1,890. 6. They are subject to a 32% tax rate. 7. The new mower is expected to be more fuel-efficient, maneuverable, and durable than the previous models and can result in reduced operating expenses of $514 per year. 8. The Thomsons will buy a maintenance contract that calls for annual payments of $129. Create an operating cash flow statement for the replacement of Richard and Linda's John Deere riding mower, Calculate the incremental operating cash flow statement below: (Round to the nearest dollar.) Richard and Linda Thomson Incremental Operating Cash Flows Replacement of John Deere Riding Mower Year 1 $ $ Savings from new and improved mower Less: Annual maintenance cost Less: Depreciation Savings (loss) before taxes Taxes (32%) Savings (loss) after taxes Incremental operating cash flow $ $ $ $ $ (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 Percentage by recovery year* Recovery year 3 years 5 years 7 years 1 33% 20% 14% 2 45% 32% 25% 3 15% 19% 18% 4 7% 12% 12% 5 12% 9% 6 5% 9% 7 9% 8 4% 9 10 11 Totals 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculati retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply t unrounded percentages or directly apply double-declining balance (200%) depreciation u LE