Operating cash flows Hoffmann-La Roche is considering replacing one permeability test equipment with a new model....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Operating cash flows Hoffmann-La Roche is considering replacing one permeability test equipment with a new model. The old equipment is fully depreciated and would last 3 more years. The new equipment is expected to have a 5-year life and depreciation charges of CHF 20,000 in year 1; CHf 32,000 in year 2; CHf 19,000 in year 3; and CHf 12,000 in both year 4 and year 5. The firm estimates the revenues and expenses (excluding depreciation and interest) for the new and old machineries to be as shown in the table below. The firm is subject to a 24% tax rate, including the cantonal tax rates. Year 1 2 3 4 5 New equipment Revenue CHF 400,000 410,000 420,000 430,000 440,000 Expenses (excluding depreciation and interest) CHF 300,000 300,000 300,000 300,000 300,000 Old equipment Revenue CHF 350,000 350,000 350,000 350,000 350,000 Expenses (excluding depreciation and interest) CHF 250,000 250,000 250,000 250,000 250,000 a. Calculate the operating cash flows associated with each equipment. b. Calculate the operating cash flows resulting from the proposed equipment replacement. c. Depict on a timeline the operating cash flows calculated in part b. Operating cash flows Hoffmann-La Roche is considering replacing one permeability test equipment with a new model. The old equipment is fully depreciated and would last 3 more years. The new equipment is expected to have a 5-year life and depreciation charges of CHF 20,000 in year 1; CHf 32,000 in year 2; CHf 19,000 in year 3; and CHf 12,000 in both year 4 and year 5. The firm estimates the revenues and expenses (excluding depreciation and interest) for the new and old machineries to be as shown in the table below. The firm is subject to a 24% tax rate, including the cantonal tax rates. Year 1 2 3 4 5 New equipment Revenue CHF 400,000 410,000 420,000 430,000 440,000 Expenses (excluding depreciation and interest) CHF 300,000 300,000 300,000 300,000 300,000 Old equipment Revenue CHF 350,000 350,000 350,000 350,000 350,000 Expenses (excluding depreciation and interest) CHF 250,000 250,000 250,000 250,000 250,000 a. Calculate the operating cash flows associated with each equipment. b. Calculate the operating cash flows resulting from the proposed equipment replacement. c. Depict on a timeline the operating cash flows calculated in part b.
Expert Answer:
Related Book For
Managerial Accounting
ISBN: 978-1118385388
2nd edition
Authors: Ramji Balakrishnan, Konduru Sivaramakrishnan, Geoff B. Sprinkle
Posted Date:
Students also viewed these finance questions
-
The Fox TV network is considering replacing one of its prime-time crime investigation shows with a new family-oriented comedy show. Before a final decision is made, network executives commission a...
-
As shown in the table below where the demand level is composed of two states only (Low and High) and an estimate of their probabilities is given, answer the following questions. Show your work Demand...
-
Edwards Manufacturing Company (EMC) is considering replacing one machine with another. The old machine was purchased 3 years ago for an installed cost of $10,000. The firm is depreciating the machine...
-
Refer to E 29 and respond to the following requirements. Data in E 2-9 Prepare the necessary adjusting entries on December 31, 2024, for the Microchip Company for each of the following situations....
-
The affiliation structure for a group of interrelated companies is diagrammed as follows: The investments were acquired at fair value equal to book value in 2011, and there are no unrealized or...
-
Tardif Company adjusts its books monthly. On September 30, 2014, notes receivable include the following: Interest is payable on the first day of each month for notes with terms of one year or longer....
-
10. ROLE REVERSAL Write a short-answer question that deals with the duty of care under the business judgment rule.
-
Kalogridis Corp. manufactures industrial dye. The company is preparing its 2011 master budget and has presented you with the following information: a. The projected December 31, 2010, balance sheet...
-
The current zero-coupon yield curve for risk-free bonds is as follows: What is the risk-free interest rate for a five-year maturity? The risk-free interest rate for a five-year maturity is %. (Round...
-
What is Jacqueline and Keiths monthly mortgage payment prior to the refinancing?
-
Compare the individual items in the actual profit and loss against that budgeted for in Figure 5.4.3. Why are some of the items up and some down. Is every figure bad? Budget Actual Variance Sales...
-
Medhurst LLC, a manufacturer, had beginning finished goods inventory of $16,000. The cost of goods manufactured for the period was $117,000. Ending finished goods inventory was $45,000. What was the...
-
2. (25 points) For the pin connected crank-slider shown, all measurements are in inches. 0 is the input. Y a. Plot 03 vs. 0. Make sure all angles are in degrees. b. Plot the distance, , vs. 0, and...
-
Blue Bhd is a listed MNC on the KLSE. Recently there were 2 deaths that occurred in the organanisation. the CEO Mr Bodoh wanted the information not to be made to external parties but kept internally....
-
In the Gomez Electronics case for the direct labour variance in the case of absorption costing, how do you get the value of 3600? Can you please share the steps?
-
Create a Power Point script per slide with talking points for each slide. The P.o.w.e.rP.oint will contain: 1 introductory slide 7 topic slides 1 closing slide 2. The script will achieve the...
-
"Sometimes, it is necessary for a conflict to spiral out of control before it can be brought under control." Is this true in every setting - in families, among friends, in the workplace, at school?...
-
Determine whether the lines are parallel, perpendicular, or neither. 2x + 3y = -12, 2y - 3x = 8
-
Magenta Manufacturing has two pools for applying overhead to products. The first pool contains labor-related overhead costs and is applied at a pre-determined rate of $0.80 per labor dollar. The...
-
Tom & Harry make ice cream. Conversion activity occurs uniformly throughout the production process, and the following data is available for June. Required: a. How many units were started during June?...
-
Premium Company has a required rate of return (cost of capital) of 15%. For the current year, the firm made $250,000 in profit using average net assets of $1,000,000. The firm has an opportunity to...
-
Question: Sports Graphics, Inc. imports "Chill" brand coolers from Taiwan. Chill coolers have an outer shell of vinyl, with handles and pockets, and an inner layer of insulation. In a recent lawsuit,...
-
Question: In a recent WTO case, several nations claimed that American laws concerning shrimp fishing were unfair and illegal. The case demonstrated a conflict between two important values. What were...
-
Question: Flyby Knight (FK) contracts to sell 12 helicopters to Air Nigeria, for $8 million each. Payment is to be made by letter of credit, issued by the Bank of Nigeria, confirmed by Citibank in...
Study smarter with the SolutionInn App