Question
Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it with a new one which is faster and easier to
Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it with a new one which is faster and easier to operate. The old machine has been depreciated over 3 years using straight line depreciation. Its original installation cost was $15,000. The old machine has been in use for 2 years, and it can be traded in for $3,500. The new machine will be purchased $24,000 and it will also be depreciated over 3 years using the straight line method. It is not expected to have a residual value. Net working capital will decrease because supply levels can be reduced by $1,500. Revenues will increase by $5,000 every year, it will result in laborsavings of $3,000 per year due to its greater speed. Reducing training expenses are expected to save an additional $2,500 per year. The firm is in the 20% tax bracket.
Required: i. Calculate the operating cash flows from years 1 to 3.
ii. What is the terminal year nonoperating cash flow?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started