Saved 7 McGafferty Corporation, a calendar-year company, is considering the sale of an old machine and the replacement of that machine with a newet, more efficient machine. Freight charges are payable at the time of delivery. Freight charges are a cost of whichever party has title to the asset while it is in transit to the buyer, If freight charges are a cost to the buyer, the buyer capitalizes freight charges as part of the cost of the newly acquired asset. McGafferty depreciates all Its long lived assets, except land, using the straight-line method. The firm uses a 10% discount rate and the income tax 01:45:18 presented below. rate is 25%. Information about the proposed sale of the old machine and the proposed purchase of the new machine Is Skippoo The old machine was purchased for cash on January 1, 2016, and placed into operation on January 1, 2016, The following Information about the old machine is available: Purchase price of old machine - all paid in cash on January 1. 2016 $8.000.D06 2016 Freight charges - FOB shipping point - all paid in cash on January 1, $200,000 Estimated service life Estimated salvage value years $2.110.000 Cash to be received on January 1, 2021 from proposed sale of old machine $3,500,000 A new machine would be purchased and placed into operation on January 1, 2021, Except for the January 1, 2021 cash payment and investment in working capital, all other cash flows occur on December 31. The following information Is available about the new machine, Its operation and eventual disposal: New Machine List price of new machine $18,060,000 First cash payment for new machine: January 1, 2021 $7,000,006 Second cash payment for new machine: December 31, 2022 $6,000,000 Third cash payment for new machine: December 31, 2023 $5,000,000 Freight charges - FOB Destination, payable on January 1, 2021 $84.748 Expected service life 10 years Expected salvage value $3,200,000 Working capital Amount to be invested on January 1, 2021 80.000 Amount to be recovered on December 31, 2030 $80,000 Annual cost savings (all in cash) generated by use of new machine $2,160,000 December 31, 2026, 2027 and 2028 payments for ordinary re $900,000 Cash to be received on December 31, 2030 from sale of new machine |$3,500,000 Assume the date of your analysis is December 31, 2020. PV of an PVof 1 @ 10% Ordinary Annuity of 1 @ 10% 0.909091 0.90909 0.826446 1735537 0.751315 2.48685. 0.683013 3.169865 0.620921 3.79078 0.564474 4.355261 0.513158 .868419 0.466507 5.334926 9 0.424098 5.759024 10 0.385543 6.144567 Enter cash inflows as well as cash outflows all as positive numbers, e.g., 1,234,567 When using the PV tables, please use the ENTIRE factor. Required - answers to parts A through H (A) What is the expected net cash inflow from the proposed sale of the old machine? $ (B) What is the after-tax present value of the amount at which the new machine would be capitalized? $ (C) What is the after-tax present value of the cash to be invested in working capital? $ Prev