Replacement versus expansion cash flows Tesla Systems has estimated the cash flows over the five-year lives of a project that will install new equipment to replace old equipment. If the firm makes this investment, it will sell the old equipment and receive after-tax proceeds of $1,544,000. If the firm decides not to undertake this project, the old equipment will remain in service and generate the cash flows listed in years 1 through 5, and it will have no value after five years. These cash flows are summarized in the following table: a. What are the incremental cash flows for this project? Assume the new equipment has no market value after 5 years. b. Instead, suppose that Tesla Systems' business is booming and that the new machine expands the firm's capacity. If they buy new equipment, they will generate cash flows as shown in the table, but they will leave the old equipment in service, and it will continue to generate $384,000 in cash flow in each of the next five years. Now what are the incremental project cash flows? a. Calculate the incremental cash flows for this replacement decision: (Enter a positive number for a cash inflow and a negative number for a cash outflow and round all numbers to the nearest dollar.) Year Old Equipment Incremental Cash Flows New Equipment (4,653,000) $ 0 $ $ 1 563,000 $ $ 2 $ 924,000 $ $ A A 3 1,359,000 $ $ Data table X on ca it will lows pment to replace old equip t, the old equipment will ren ng table: (Click on the following icon in order to copy its contents into a spreadsheet.) sh flo Syste e old New equipment cost Year generate cash flows as sho Jare the incremental project sh flo New equipment Old equipment -$4,653,000 Operating cash flows $563,000 $384,000 924,000 384,000 1,359,000 384,000 2,221,000 384,000 3,401,000 384,000 1 2 3 4 5 pw and round all numbers to t ent 3,000) 53,000 24,000 59,000 Print Done O Time Remaining: 01:43:28 Next Replacement versus expansion cash flows Tesla Systems has estimated the cash flows over the five-year lives of a project that will install new equip the firm makes this investment, it will sell the old equipment and receive after-tax proceeds of $1,544,000. If the firm decides not to undertake this project, service and generate the cash flows listed in years 1 through 5, and it will have no value after five years. These cash flows are summarized in the following a. What are the incremental cash flows for this project? Assume the new equipment has no market value after 5 years. b. Instead, suppose that Tesla Systems' business is booming and that the new machine expands the firm's capacity. If they buy new equipment, they will ge the table, but they will leave the old equipment in service, and it will continue to generate $384.000 in cash flow in each of the next five years. Now what are flows? . Year Old Equipment Incremental Cash Flows 0 $ New Equipment (4,653,000) $ 563,000 $ 924,000 $ $ 1 $ $ 2 $ $ 3 $ 1,359,000 $ 2,221,000 $ $ $ 4 $ 5 $ 3,401,000 $ $ Replacement versus expansion cash flows Tesla Systems has estimated the cash flows over the five-year lives of a project that will install new equipme the firm makes this investment, it will sell the old equipment and receive after-tax proceeds of $1,544,000. If the firm decides not to undertake this project, th service and generate the cash flows listed in years 1 through 5, and it will have no value after five years. These cash flows are summarized in the following ta a. What are the incremental cash flows for this project? Assume the new equipment has no market value after 5 years. b. Instead, suppose that Tesla Systems' business is booming and that the new machine expands the firm's capacity. If they buy new equipment, they will gene the table, but they will leave the old equipment in service, and it will continue to generate $384,000 in cash flow in each of the next five years. Now what are th flows? Year New Equipment (4,653,000) $ Old Equipment Incremental Cash Flows 0 $ 1 $ 563,000 $ $ 2 $ 924,000 $ 3 $ 1.359,000 $ 2,221,000 $ $ 4 $ $ 5 $ 3,401,000 $ $ on Replacement versus expansion cash flows Tesla Systems has estimated the cash flows over the five-year lives of a project that will install new equipment to replace old equipment. the firm makes this investment, it will sell the old equipment and receive after-tax proceeds of $1,544,000. If the firm decides not to undertake this project, the old equipment will remain in service and generate the cash flows listed in years 1 through 5, and it will have no value after five years. These cash flows are summarized in the following table: a. What are the incremental cash flows for this project? Assume the new equipment has no market value after 5 years. b. Instead, suppose that Tesla Systems' business is booming and that the new machine expands the firm's capacity. If they buy new equipment, they will generate cash flows as shown in the table, but they will leave the old equipment in service, and it will continue to generate $384,000 in cash flow in each of the next five years. Now what are the incremental project cash flows? a. Calculate the incremental cash flows for this replacement decision: (Enter a positive number for a cash inflow and a negative number for a cash outflow and round all numbers to the nearest dollar.) a Year New Equipment Old Equipment Incremental Cash Flows 0 $ (4,653,000) $ $ 1 563,000 $ $ $ $ 2. 924,000 $ $ 3 $ 1,359,000 $ $ Replacement versus expansion cash flows Tesla Systems has estimated the cash flows over the five-year lives of a project that will install new equipment to replace old equipment. It the firm makes this investment, it will sell the old.equipment and receive after-tax proceeds of $1,544,000. If the firm decides not to undertake this project, the old equipment will remain in service and generate the cash flows listed in years 1 through 5, and it will have no value after five years. These cash flows are summarized in the following table: a. What are the incremental cash flows for this project? Assume the new equipment has no market value after 5 years. b. Instead, suppose that Tesla Systems' business is booming and that the new machine expands the firm's capacity. If they buy new equipment, they will generate cash flows as shown in the table, but they will leave the old equipment in service, and it will continue to generate $384,000 in cash flow in each of the next five years. Now what are the incremental project cash flows? .... ative number for a cash outflow and round all numbers to the b. Calculate the incremental cash flows for this expansion decision: (Enter a positive number for a cash inflow and a nearest dollar.) Year Old Equipment Incremental Cash Flows 0 $ New Equipment (4,653,000) $ 563,000 $ $ 1 $ 2 A 924,000 $ $ GA 3 1,359,000 $ $