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b calculate the incremental relevant operating cash

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Unformatted text preview: area. The corporation is considering the replacement of 10 of its older buses. The existing buses were purchased 4 years ago at a total cost of $2,700,000 and are being depreciated using MACRS and a 5-year recovery period (see Table 3.2, page 100). The new buses would have larger passenger capacity and better fuel efficiency as well as lower maintenance CHAPTER 8 387 Capital Budgeting Cash Flows costs. The total cost for 10 new buses is $3,000,000. Like the older buses, the new ones would be depreciated using MACRS and a 5-year recovery period. Scenic is taxed at a rate of 40% on ordinary income and capital gains. The following table presents revenues and cash expenses for the proposed purchase as well as the present fleet. Use all of the information given to calculate operating cash inflows for the proposed and present buses. Year 1 2 3 $1,850,000 $1,850,000 $1,830,000 460,000 460,000 468,000 $1,800,000 $1,800,000 500,000 510,000 4 5 6 $1,825,000 $1,815,000 $1,800,000 472,000 485,000 500,000 $1,790,000 $1,785,000 $1,775,000 $1,750,000 5...
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