- Operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated

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Operating Cash Inflows Strong Tool Company Has Been Considering Purchasing A New Lathe To Replace A Fully Depreciated 1 (55.89 KiB) Viewed 51 times

- Operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that would otherwise last 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,260 in Year 1; 53,616 in Year 2; $2,147 in Year 3; $1,356 in both Year 4 and Year 5; and $565 in Year 6. The firm estimates the revenues and expenses (excluding depreciation and interest) for the new and the old lathes to be as shown in the following table : The firm is subject to a 40% tax rate on ordinary income. a. Calculate the operating cash inflows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) b. Calculate the 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 a. Calculate the operating cash inflows associated with the new lathe below. (Round to the nearest dollar.) Year 1 (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Revenue $ New Lathe Old Lathe Expenses (excluding depreciation and interest) $ Expenses Expenses (excluding depreciation and (excluding depreciation and Profit before depreciation and taxes $ Year Revenue interest) Revenue interest) 1 $41.700 $30,300 $ $33,600 Depreciation $24.400 2 2 30,300 33,600 24,400 Net profit before taxes $ $ 3 43,700 30,300 33,600 24,400 Taxes $ S 4 44.700 30.300 33,600 24,400 5 45,700 30,300 33,600 24.400 Net profit after taxes $ Operating cash flows $ 42.700 Print Done