Homework Hw2 Cap Budgeting Cf Estimation Question 7 P11 18 Similar To Part 1 Of 6 Hw Score 10 1 Of 10 Points Poin 1 (147.13 KiB) Viewed 41 times
Homework Hw2 Cap Budgeting Cf Estimation Question 7 P11 18 Similar To Part 1 Of 6 Hw Score 10 1 Of 10 Points Poin 2 (135.24 KiB) Viewed 41 times
Homework: HW2-Cap Budgeting CF Estimation Question 7, P11-18 (similar to) Part 1 of 6 HW Score: 10%, 1 of 10 points Points: 0 of 1 Save Incremental operating cash inflows-Expense reduction Miller Corporation is considering replacing a machine. The replacement will reduce operating expenses (that is, increase earnings before depreciation, interest, and taxes) by $25,000 per year for each of the 5 years the new machine is expected to last. Although the old machine has zero book value, it can be used for 5 more years. The depreciable value of the new machine is $42,000. The firm will depreciate the machine under MACRS using a 5-year recovery and is subject to a 40% tax rate. Estimate the incremental operating cash inflows generated by the replacement. (Note: Be sure to consider the depreciation in year 6.) Find the incremental operating cash inflows generated by the replacement for year 1 below: (Round to the nearest dollar.) Year 1 Incremental expense savings $ 25,000 $ Incremental profits before depreciation and taxes Less: Depreciation Net profits before taxes $ $ Taxes $ Net profits after taxes $ Operating cash flows $ - X Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) 3 years 10 years 45% Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* Recovery year 5 years 7 years 33% 20% 14% 10% 2 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 6% 10 6% 11 4% Totals 100% 100% 100% 100% *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 half-year convention Print Done
Homework: HW2-Cap Budgeting CF Estimation Question 8, P11-19 (similar to) Part 1 of 14 HW Score: 10%, 1 of 10 points O Points: 0 of 1 Save 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 $2,240 in Year 1; $3,584 in Year 2; $2,128 in Year 3; $1,344 in both Year 4 and Year 5; and $560 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 5. 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. 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 $ Х Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Year 1 2 3 4 5 Revenue $41,900 42,900 43,900 44.900 45,900 New Lathe Expenses (excluding depreciation and interest) $28,100 28,100 28,100 28,100 28,100 Revenue $34,800 34,800 34,800 34,800 34,800 Old Lathe Expenses (excluding depreciation and interest) $25,000 25,000 25,000 25,000 25,000 Print Done
Join a community of subject matter experts. Register for FREE to view solutions, replies, and use search function. Request answer by replying!