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Unformatted text preview: operating cash inflows will result from the renewal?
LG5 8–17 Incremental operating cash inflows—Expense reduction Miller Corporation is
considering replacing a machine. The replacement will reduce operating
expenses (that is, increase revenues) by $16,000 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 $48,000. The firm will depreciate the machine under MACRS using a 5-year
recovery period (see Table 3.2 on page 100 for the applicable depreciation percentages) and is subject to a 40% tax rate on ordinary income. Estimate the
incremental operating cash inflows generated by the replacement. (Note: Be sure
to consider the depreciation in year 6.) LG5 8–18 Incremental operating cash inflows Strong Tool Company has been considering purchasing a new lathe to replace a fully depreciated lathe that will last 5
more years. The new lathe is expected to have a 5-year life and de...
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This document was uploaded on 01/19/2014.
- Fall '13