Rockyford Company must replace some machinery that has zero book value and a curront maiket value of $1,800. One possiblity is to Invest in new machinery costing $40,000. This new machinery would peoduce estimated annuai pretax cash operating savings of \$12,500. Assume the new machine will have a useful lfe of 4 yoars and depreciation of $10,000 each yoar for book and tax purposes. It will have no salvage value at the end of 4 years. Thp imestment in this new mach nery would requite an additional $3,000 investment of net working capital, (Assume that when the oid machine was porehased, the incremental net working captal required at the time was 501 If Rockyford accepts this impstment proposal, the disposal of the old machinery and the invostment in the new one wel occur on December 31 of this year. The cash fows froqu the investment are expected to occur over a founycar period Aockyford is subject to a 40% income tax rate for all ordinary income and capital gains and tas a tox weighted-average afteritar cost of caplial All operating and tax cash flows ale assumed to oceur at yoar.end. (F or Parts 2 and 3, uso the reievamt tablo from Acoentlis C-Tablik or Tables. 2. Required: 1. What is the aftertax cash flow arising from disposing of the oid machinay? 2. What is the present value of the aher-tax cash fows for the next 4 years attributable to the cash operating savings? 3. What is the present value of the tax-shleld effect of deprociation exponse for year t? of eapital. All operating and tax consh Hlows are assumed to occur at yesr-end. (For Parts 2 and 3, use the relevant tabie trom Anpencix C-Table tor Toben 2) Required: 1. What is the aftertax cash flow arising from disposing of the old machinery? 2. What is the present vaiue of the attertax cash flows for the noxt 4 years attributabie to the cash operating savings? 3. What is the present value of the tax shieid effect of depreciotion expense for yoor 12 4. Which oge of the following is the proper treatment for the odditional $3,000 of net working capital requlred in the current year? Complete this question by entering your answers in the tabs below. Whot is twe after tax cash fiow arising from dtsposing of the old machinery? of capital. All operating and tax cash tiows are assumed to occur at year-end. (For Parts 2 and 3, use the relevant table from Agpencis C-Tablo 1 or Table 2.) Required: 1. What is the after-tox cash flow arising from disposing of the old machinery? 2. What is the present value of the after-tax cash flows for the next 4 years attributable to the cash operating sovings? 3. What is the present value of the tax-shicld effoct of depreciation expense for year 1 ? 4. Which one of the following is the proper treotment for the additional $3,000 of net working cap tal required in the current year? Complete this question by entering your answers in the tabs below. What is the present value of the after-thx cash now for the next 4 yeari attributabie to the caah operating anvingv? tRound your anewe to nearest whole dotlar amounk
