Please complete part a) for each year separately, 1-6.

Complete step b) for each year 1-6 separately

For part c, pick the timeline which shows the correct incremental operating cash flows calculated in part b.

Instructor Tip:

1)Operating cash flows = cash revenues - cash operating expenses - taxes. 2)All amounts for year 6 should be zero. This is leftover from when the problem used MACRS depreciation. 3)To check the incremental cash flows, see if they agree with any of the amounts on the timelines in part c. a) Ignore any messages that relate to MACRS. Those couldn't be changed. 4)In part c, the cash flows are all off by one period to the left, and the program won't let me fix this. For the correct answer, assume the timelines are shifted one period to the right.

Incremental operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that will last 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,020 in Year 1; $3,232 in Year 2; $1,919 in Year 3; $1,212 in both Year 4 and Year 5. The firm estimates the revenues and expenses (excluding depreciation) for the new and the old lathes to be as shown in the following table B. The firm is subject to a 40% tax rate on ordinary income. a. Calculate the operating cash inflows associated with each lathe. b. Calculate the incremental (relevant) operating cash inflows resulting from the proposed lathe replacement. c. Depict on a time line the incremental operating cash inflows calculated in part b. - X Data Table (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a spreadsheet.) Year 1 New Lathe Expenses (excluding depreciation and interest) $31,900 31,900 31,900 31,900 31,900 Revenue $40,900 41,900 42,900 43,900 44,900 2 3 4 5 Old Lathe Expenses (excluding depreciation and interest) $26,400 26,400 26,400 26,400 26,400 Revenue $33,800 33,800 33,800 33,800 33,800 Print Done a. Calculate the operating cash inflows associated with the new lathe below: (Round to the nearest dollar.) Year 1 Revenue $ Expenses (excluding depreciation and interest) $ $ Profit before depreciation and taxes Depreciation Net profit before taxes $ $ Taxes $ Net profit after taxes $ Operating cash flows $ Calculate the operating cash inflows associated with the old lathe below: (Round to the nearest dollar.) Year 1-5 Revenue $ Expenses (excluding depreciation and interest) Profit before depreciation and taxes Depreciation $ Net profit before taxes $ Taxes Net profit after taxes $ $ Operating cash flows b. Calculate the incremental (relevant) operating cash inflows resulting from the proposed lathe replacement. Calculate the incremental (relevant) operating cash inflows resulting from the proposed lathe replacement below: (Round to the nearest dollar.) Year 1 New Lathe $ Old Lathe $ Incremental Cash Flows $ (Round to the nearest dollar.) c. Depict on a time line the incremental operating cash inflows calculated in part b. (Select the best choice below.) O A. Year Year 0 2 3 4 5 6 Cash flow $1,768 $2,853 $2,928 $3,245 $3,845 $0 B. Year Year 0 1 2 3 4 5 6 + Cash flow $6,208 $7,293 $7,368 $7,685 $8,285 $0 OC. Year Year 0 2 3 4. 5 6 Cash flow $1,768 $2,853 $2,928 $3,245 $3,845 $0