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The Rumpel Company purchased a felt press last year at a cost of $7,500. The machine has worn out quickly and is slowing production. It
The Rumpel Company purchased a felt press last year at a cost of $7,500. The machine has worn out quickly and is slowing production. It could be sold todary for $4,000, The division manager reports that, for $12,000 (including installation), a new felt press can be bought, Two years after replacement the old press can be sold for $200 and the new press will be worth $2,000. The new press will increase EBrTOA by $7,000, but, to sustain the higher rate of production, the company will need additional felt inventory of $3,000. Taxes are 40%. Assume that depreciation is not tax deductible. What are the initial cash flows for the replacement? (Answer in dollars and round to the nearest dollar). Assume that depreciation is not tax deductible. The tax rate is 40\%. Use this information to answer the following questions. What are the initial cash flows for the replacement? (Answer in dollars and round to the nearest dollar.) What are incremental operating cash flows in the first year after the replacement? (Answer in dollars and round to the nearest dollar.) What are the terminal year cash flows? (Answer in dollars and round to the nearest doliar.)
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