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V IntegrativeDetermining relevant cash ows Lombard Company is contemplating the purchase of a new high-speed widget grinder to replace the existing grinder. The existing grinder was purchased 2 years ago at an installed cost of $65,000; it was being depreciated under MACRS using a 5-year recovery period. The existing grinder is expected to have a usable life of 5 more years. The new grinder costs $102,400 and requires $5,500 in installation costs; it has a 5-year usable life and would be depreciated under MACRS using a 5-year recovery period. Lombard can currently sell the existing grinder for $70,800 without incurring any removal or cleanup costs. To support the increased business resulting from purchase of the new grinder, accounts receivable would increase by $40,800, inventories by $30,600, and accounts payable by $59,000. At the end of 5 years, the existing grinder would have a market value of zero; the new grinder would be sold to net $29,600 after removal and cleanup costs and before taxes. The rm is subject a 40% tax rate. The estimated earnings before depreciation, interest, and taxes over the 5 years for both the new and the existing grinder are shown in the following table E . (Table a contains the applicable MACRS depreciation percentages.) a. Calculate the initial investment associated with the replacement of the existing grinder by the new one. h. Determine the operating cash inows associated with the proposed grinder replacement. (Note: Be sure to consider the depreciation in year 6.) c. Determine the terminal cash ow expected at the end of year 5 from the proposed grinder replacement. d. Depict on a time line the relevant cash ows associated with the proposed grinder replacement decision. a. Calculate the initial investment associated with replacement of the old machine by the new one. 0 Data Table Calculate the initial investment below: (Round to the nearest dollar.) Cost of new asset 5 (Click on the icon here E1 in order to copy the contents of the data table below into a spreadsheet.) Installation costs Earnings before Total cost Of new asset $ depreciation, interest, and taxes Proceeds from sale of old asset $ New grinder Existing grinder Tax on sale of old asset $431600 $261100 43,600 24,100 Total proceeds, sale of old asset $ 43,600 22,100 43,600 20,100 Enter any number in the edit fields and then continue to the next question. 43,600 18,100 Print I Done I ' ' } 0 Data Table - >