Relevant cash flows No terminal value Central Laundry and Cleaners is considering replacing an existing piece of machinery with a more sophisticated machine. The old machine was purchased 3 years ago at a cost of $47,300, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable life remaining The new machine that is being considered costs $76,800 and requires $3,900 in installation costs. The new machine would be depreciated under MACRS using a 5-year recovery period. The firm can currently sell the old machine for $54,700 without incurring any removal or cleanup costs. The firm is subject to a tax rate of 40% The revenues and expenses (excluding depreciation and interest) associated with the new and the old machines for the next 5 years are given in the table (Table contains the applicable MACRS depreciation percentages) Note. The new machine will have no terminal value at the end of 5 years a. Calculate the mitial investment associated with replacement of the old machine by the new one. b. Determine the incremental operating cash inflows associated with the proposed replacement. (Note Be sure to consider the depreciation in year 6.) c. Depict on a time line the relevant cash flows found in parts (a) and (b) associated with the proposed replacement decision n e Bo e nu Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) New machine. Year 1 2 3 4 5 Revenue $750,600 750,600 750,600 750,600 750,600 Expenses (excluding depreciation and interest) $720,000 720,000 720,000 720,000 720,000 Revenue $674,200 676,200 680,200 678,200 674,200 Old machine Expenses (excluding depreciation and interest) $661,000 661,000 661,000 661,000 661,000 I X d peri W emo old en Data table Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 1 2 3 4 5 6 7 8 9 10 11 Totals 3 years 33% 45% 15% 7% 100% Percentage by recovery year" 5 years 20% 32% 19% 12% 12% 5% 100% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 100% 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% 4% 100% - X S sticate covery The ne any nd the at the a. Calculate the initial investment associated with replacement of the old machine by the new one. b. Determine the incremental operating cash inflows associated with the proposed replacement. (Note: Be sure t c. Depict on a time line the relevant cash flows found in parts (a) and (b) associated with the proposed replaceme Calculate the initial investment below: (Round to the nearest dollar.) Cost of new asset Installation costs Total cost of new asset Proceeds from sale of old asset Tax on sale of old asset Total proceeds, sale of old asset Initial investment SA 69 S LA 11 IMM