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 551,900, 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 $76.900 and requires $4.100 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 $54,000 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 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 to consider the depreciation in year 6.) e. Depict on a timeline the relevant cash flows found in parts (a) and (b) associated with the proposed replacement decision a. Calculate the initial investment associated with replacement of the old machine by the new one. Calculate the initial investment below (Round to the nearest dollar) Cost of new asset Instalation 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 Enter any number in the edit fields and then click Check Answer 13 parts Clear All remaining Check Answer 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 551,900, 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 $76.900 and requires $4.100 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 $54,000 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 b. Determine Data Table c. Depict on a. Calculate Calculate the (Click on the icon here in order to copy the contents of the data table below into a spreadsheet) Cost of New machine Old machine Expenses Expenses Instalati (excluding depreciation and (excluding depreciation and Year Revenue Total interest) Revenue interest) $749,600 $720,000 $673.700 $659,800 Proceed 2 749,600 720,000 675,700 659,800 Tax ons 3 749.600 720.000 679,700 659.800 749.600 720.000 677,700 659 800 5 749.600 720.000 673.700 659,800 Initialing 1 4 Total Print Done Enter any nu 13 parts Clear All remaining Check Answer Dueto Data Table Ine hine The P11-16 (similar to) Relevant cash flows-No termin The old machine was purchased 3 has 5 years of usable life remaining depreciated under MACRS using a firm is subject to a tax rate of 40% years are given in the table (Table years. a. Calculate the initial investment b. Determine the incremental opere c. Depict on a timeline the relevan a. Calculate the initial investment Calculate the initial investment beld 5 20% (Click on the icon here in order to copy the contents of the datatable 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 10 years 1 33% 10% 2 32% 25% 18% 3 15% 19% 18% 14% 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 7 9% 7% 6% 6% 10 Cost of new asset Installation costs Total cost of new asset Proceeds from sale of old asse Tax on sale of old asset Total proceeds, sale of old a Totals 100% 100% 100% 100% "These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year convention Initial Investment Enter any number in the edit field Print Done 13 parts remaining