Need help (a) thru (c)

10 Sal 10) Question Help Relevant cash flows No terminal value Central Laundry and Cleaners is considering replacing an existing piece of machinery with a more sophisticated machine. The old machine was purchased 3 years ago at a cost of $50,000, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable life remaining. The new machine that is being considered costs $76,200 and requires $4,100 in installation costs. The new machine would be depreciated under MACRS using a 5-year recovery period. The firm can currently sell the old machine for $55,700 without incurring any removal or cleanup costs. The firm is subject to a tax rate of 40%. The revenues and expenses (excluding depreciation and interest) associated with the new and the old machines for the next 5 years are given in the table Table I contains the applicable MACRS depreciation percentages.) Note: The new machine will have no terminal value at the end of 5 years. a. Calculate the initial investment associated with replacement of the old machine by the new one. b. Determine the incremental operating cash inflows associated with the proposed replacement. (Note: Be sure to consider the depreciation in year 6.) c. Depict on a timeline the relevant cash flows found in parts (a) and (b) associated with the proposed replacement decision. a. Calculate the initial investment associated with replacement of the old machine by the new one. Calculate the initial investment below: (Round to the nearest dollar) Data Table Cost of new asset s 79100 Installation costs 809847 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Total cost of new asset 6527 Data Table 10 years 1 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year 1 2 3 4 5 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 33% 20% 14% 10% 2 4596 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 99 6 5% 9% 8% 7 946 7% 8 4% 6% 9 694 10 6% 11 49 Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while New machine Expenses (excluding depreciation and interest) $719,600 719,600 719,600 719,600 719,600 Revenue $749,700 749,700 749,700 749.700 749,700 Old machine Expenses (excluding depreciation interest) $659,100 659,100 659.100 659.100 659,100 Revenue $673,600 675,600 679,600 677,600 673,600 10 Sal 10) Question Help Relevant cash flows No terminal value Central Laundry and Cleaners is considering replacing an existing piece of machinery with a more sophisticated machine. The old machine was purchased 3 years ago at a cost of $50,000, and this amount was being depreciated under MACRS using a 5-year recovery period. The machine has 5 years of usable life remaining. The new machine that is being considered costs $76,200 and requires $4,100 in installation costs. The new machine would be depreciated under MACRS using a 5-year recovery period. The firm can currently sell the old machine for $55,700 without incurring any removal or cleanup costs. The firm is subject to a tax rate of 40%. The revenues and expenses (excluding depreciation and interest) associated with the new and the old machines for the next 5 years are given in the table Table I contains the applicable MACRS depreciation percentages.) Note: The new machine will have no terminal value at the end of 5 years. a. Calculate the initial investment associated with replacement of the old machine by the new one. b. Determine the incremental operating cash inflows associated with the proposed replacement. (Note: Be sure to consider the depreciation in year 6.) c. Depict on a timeline the relevant cash flows found in parts (a) and (b) associated with the proposed replacement decision. a. Calculate the initial investment associated with replacement of the old machine by the new one. Calculate the initial investment below: (Round to the nearest dollar) Data Table Cost of new asset s 79100 Installation costs 809847 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Total cost of new asset 6527 Data Table 10 years 1 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year 1 2 3 4 5 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 33% 20% 14% 10% 2 4596 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 99 6 5% 9% 8% 7 946 7% 8 4% 6% 9 694 10 6% 11 49 Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while New machine Expenses (excluding depreciation and interest) $719,600 719,600 719,600 719,600 719,600 Revenue $749,700 749,700 749,700 749.700 749,700 Old machine Expenses (excluding depreciation interest) $659,100 659,100 659.100 659.100 659,100 Revenue $673,600 675,600 679,600 677,600 673,600