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Please Help with questions A, B, and C Incremental operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a
Please Help with questions A, B, and C
Incremental operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that will last 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,160 in Year 1; $3,456 in Year 2: $2,052 in Year 3; $1,296 in both Year 4 and Year 5; and $540 in Year 6. The firm estimates the revenues and expenses (excluding depreciation) 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 incremental (relevant) 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 1 i Data Table $ 9,6001 10.600 $ Revenue Expenses (excluding depreciation and interest) Profit before depreciation and taxes Depreciation (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) $ 11,600 $ $ Net profit before taxes Taxes Year $ New Lathe Expenses (excluding depreciation and interest) $30,400 30,400 30,400 30,400 30.400 Net profit after taxes Old Lathe Expenses (excluding depreciation and interest) $26,500 26,500 26.500 26.500 26.500 Revenue $40,000 41,000 42,000 43,000 44,000 $ Revenue $36,800 36,800 36.800 36.800 36.800 2 3 4 5 5 Operating cash flows $ Print Done Enter any number in the edit fields and then click Check Answer. ? 13 Permaining Clear All CheckStep by Step Solution
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