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What is Year 6's numbers? Operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that
What is Year 6's numbers?
Operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that would otherwise last 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,120 in Year 1: $3,392 in Year 2: S2,014 in Year 3: $1,272 in both Year 4 and Year 5; and $530 in Year 6. The firm estimates the revenues and expenses (excluding depreciation and interest) for the new and the old lathes to be as shown in the following table B. The firm is subject to a 40% tax rate on ordinary income. a. Calculate the operating cash inflows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) b. Calculate the operating cash inflows resulting from the proposed lathe replacement c. Depict on a time line the incremental operating cash inflows calculated in part b. LAVOIDDO CALIUty up ou DI INDICOL Profit before depreciation and taxes S - X 11,100 1,272 Data table Depreciation S Net profit before taxes S 9.828 3,931 Taxes S Net profit after taxes S 5,897 S 7.169 Operating cash flows ( (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) a . New Lathe Old Lathe Expenses Expenses (excluding depreciation and (excluding depreciation and Year Revenue interest) Revenue interest 1 $38,900 $31.800 $36.700 $24,500 2 39,900 31,800 38,700 24,500 3 40,900 31,800 36,700 24,500 4 4 41,900 31,800 36,700 24,500 5 42,900 31,800 36,700 24,500 Year 6 S 0 0 S 0 S 0 Revenue Expenses (excluding depreciation and Interest) Profit before depreciation and taxes Depreciation Net profit before taxes Taxes S 530 S S Print Done Nel profit after laxos S S Operating cash flows S SStep by Step Solution
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