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Score: 0 of 12 pts 5 of 5 (1 complete) HW Score: 12 82%, 5 of 39 pts P11-17 (similar to) Question Help Integrative-Determining relevant

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Score: 0 of 12 pts 5 of 5 (1 complete) HW Score: 12 82%, 5 of 39 pts P11-17 (similar to) Question Help Integrative-Determining relevant cash flows Lombard Company is contemplating the purchase of a new high-speed widget ander to replace the casting under The existing grander was purchased 2 years ago at an installed cost of $55,400, it was boing depreciated under MACRS using a 5 year recovery penod The existing grinder is expected to have a usable life of 5 more years. The new grinder costs $102.400 and requires $4,600 in installation costs, it has a 5 year usable life and would be depreciated under MACRS using a 5-year recovery period Lombard con currently sell the existing grinder for $69.900 without incurring any removal or cleanup costs to support the increased business resulting from purchase of the new grinder accounts receivable would increase by S40 100, inventories by 530 900 and accounts payable by $57500. At the end of 5 years, the existing grinder would have a market value of zero the new grinder would be sold to net $28.900 after removal and cleanup costs and belote taxes The firm is subject a 40% tax rate. The estimated earnings before depreciation, interest and taxes over the 5 years for both the new and the exsting grinder are shown in the following table Cable contains the applicable MAGRS depreciation percentages) a. Calculate the wil investment associated with the replacement of the existing grinder by the new one. b. Dotermine the operating cash inflows associated with the proposed gnnder replacement (Note Be sure to consider the depreciation in year 6) c. Determine the fominal cash flow expected at the end of year from the proposed grinder replacement d. Depict on a timeline the relevant cash flows associated with the proposed grinder replacement decision a. Calculato the initial investment associated with replacement of the old matching by the now.200. Calculate the initial investment below (Round to the nearest dollar) Data Table Cost of now asset S Installation costs Total cost of new asset Proceeds from sale of old asset Tax on sale of old assot Total proceeds, solo of old asset Change in working capital (Click on the icon here in order to copy the contents of the datatable below into a spreadsheet Earnings before depreciation Interest, and taxes Year New grinder Existing grinder 1 $43,600 $25,700 2 43.600 23 700 3 43,000 21,700 4 43 000 19 700 5 43.600 17 700 Enter any number in the edit fields and then click Check Answer 14 parts remaining Print Done Data Table 10 years (Click on the icon here in order to copy the contents of the data table 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 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 12% 9% 9% 6 5% 9% 8% 7 7% 8 4% 6% 9 6% 10 6% 11 4% 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 9% Print Done

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