Question $1$

Question $2$

Net cash flows 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 $$45,600,$ 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 $$76,400$ and requires $$3,500$ 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 $$54,000$ without incurring any removal or cleanup costs. The firm is subject to a tax rate of $21\%.$ 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 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 cash flow associated with replacement of the old machine by the new one.

b$.$ Determine the periodic cash flows associated with the proposed replacement. $($Note: Be sure to consider the depreciation in year $6.)$

Data table

ata table

$*$These percentages have been rounded to the nearest whole percent to simplify calculations while

retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual

unrounded percentages or directly apply double$-$declining balance $(200\%)$ depreciation using the he

convention.