Answer Happy

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 $2,220 in Year 1; $3,552 in Year 2: $2,109 in Year 3; $1,332 in both Year 4 and Yea 5; and $555 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 B. 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 $ - X 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 Revenue $40,800 41,800 42,800 43,800 44,800 New Lathe Expenses (excluding depreciation and interest) $28,400 28,400 28,400 28,400 28,400 Revenue $36,000 36,000 36,000 36,000 36,000 Old Lathe Expenses (excluding depreciation and interest) $24,700 24,700 24,700 24,700 24,700 4 5 Print Done