Question: Answer this question in hand written format. Edit: Please read second line of question carefully. question is not incomplete. Nestle Company has been considering purchasing

Answer this question in hand written format.

Edit: Please read second line of question carefully. question is not incomplete.

Nestle Company has been considering purchasing a new production machine, to replace a fully depreciated Machine that will last 4 more years. The new machine is expected to have a 4-year life and depreciating through 5 years MARCS recovery period. The firm estimates the revenues and expenses (excluding depreciation) for the new and the old machine to be as shown in the following table. The firm is subject to a 40% tax rate on ordinary income.

Year 1

Year 2

Year 3

Year 4

New Machine

Revenue

30,000

31,000

32,000

32,000

Expenses (excl. dep.)

10,000

10,000

10,000

10,000

Old Machine

Revenue

35000

35000

35000

35000

Expenses (excl. dep.)

15,000

15,000

15,000

15,000

  1. Calculate the operating cash inflows for each machine.
  2. Calculate the incremental operating cash inflows resulting from the proposed replacement.
  3. Depict on a timeline the incremental operating cash inflows calculated.

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