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Homework answers / question archive / 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

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

Accounting

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 $2,300 in Year 1; $3,680 in Year 2, S2,185 in Year 3; $1,380 in both Year 4 and Year 5, and $575 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. a. Calculate the operating cash inflows associated with the new lathe below: (Round to the nearest dollar.) Year 1 Data Table - X Revenue $ Expenses (excluding depreciation and interest) $ (Click on the icon here e in order to copy the contents of the data table below into a spreadsheet.) Profit before depreciation and taxes $ Depreciation $ New Lathe Old Lathe Expenses Expenses Net profit before taxes $ (excluding depreciation and (excluding depreciation and Taxes $ Year Revenue interest) Revenue interest) 1 $40,000 $30,200 $35,200 $23,100 Net profit after taxes $ 2 41,000 30,200 35,200 23,100 $ 3 42.000 Operating cash flows 30,200 35,200 23,100 4 43,000 30,200 35,200 23,100 5 Enter any number in the edit fields and then click Check Answer. 44,000 30,200 35,200 23,100 

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