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.
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| 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 |
- Calculate the operating cash inflows for each machine.
- Calculate the incremental operating cash inflows resulting from the proposed replacement.
- Depict on a timeline the incremental operating cash inflows calculated.
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