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Note be sure to consider the depreciation in year 6

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Unformatted text preview: preciation charges of $2,000 in year 1; $3,200 in year 2; $1,900 in year 3; $1,200 in both year 4 and year 5; and $500 in year 6. The firm estimates the revenues and expenses (excluding depreciation) 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. New lathe Expenses (excl. depr.) Old lathe Revenue Expenses (excl. depr.) Year Revenue 1 $40,000 $30,000 $35,000 $25,000 2 41,000 30,000 35,000 25,000 3 42,000 30,000 35,000 25,000 4 43,000 30,000 35,000 25,000 5 44,000 30,000 35,000 25,000 a. Calculate the operating cash inflows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) b. Calculate the incremental (relevant) operating cash inflows resulting from the proposed lathe replacement. c. Depict on a time line the incremental operating cash inflows calculated in part b. LG5 8–19 Determining operating cash inflows Scenic Tours, Inc., is a provider of bus tours throughout the New England...
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