Assume that it is January 1, 2022, and that the Mendoza Company is considering the replacement of a machine that has been used forthe past 3 years in a special project for the company. This project is expected to continue for an additional 5 years (i.e., until the end of2026). Mendoza will either keep the existing machine for another 5 years (8 years total) or replace the existing machine now with anew model that has a 5-year estimated life. Pertinent facts regarding this decision are as follows:Keep Existing MachinePurchase New MachinePurchase price of machine (including transportation,setup charges, etc.)Useful life (determined at time of acquisition)Estimated salvage value, end of 2026*Expected cash operating costs, per year:Variable (per unit produced/sold)Fixed costs (total)Estimated salvage (terminal) values:January 1, 2022December 31, 2026Net working capital committed at time of acquisition ofexisting machine (all fully recovered at end ofproject, December 31, 2026)Incremental net working capital required if new machineis purchased on January 1, 2022 (all fully recoveredat end of project, December 31, 2026)Expected annual volume of output/sales (in units), overthe period 2022 to 2026*Note: These amounts are used for depreciation calculations.$ 165,0008 years$ 21,500$ 0.40$ 26,500$ 69,500$ 14,250$ 31,500$ 205,000$ 26,5005 years$ 0.34$ 25,500$ 25,000$ 11,500515,000515,000Assume further that Mendoza is subject to a 30% income tax, for both ordinary income and gains/losses associated with disposal ofmachinery, and that all cash flows occur at the end of the year, except for the initial investment. Assume that straight-line depreciationis used for tax purposes and that any tax associated with the disposal of machinery occurs at the same time as the related transaction.Required:1. Determine relevant cash flows (after-tax) at the time of purchase of the new machine (i.e., time 0: January 1, 2022).2. Determine the relevant (after-tax) cash inflow each year of project operation (i.e., at the end of each of years 1 through 5).3. Determine the relevant (after-tax) cash inflow at the end of the project's life (i.e., at the project's disposal time, December 31, 2026).5. Determine the undiscounted net cash flow (after tax) for the new machine and determine whether, on this basis, the old machineshould be replaced.Show Transcribed TextC(For all requirements, do not round intermediate calculations. round your answers to the nearest whole dollar amount.)1. Net cash flow (after-tax), time 0 (i.e., at purchase point)2. Net cash inflow (after-tax), during the project operation3. Net cash inflow (after-tax), at the end of the project's lifeUndiscounted net cash flow (after tax) for the new machine5сл

Name: Assume that it is January 1, 2022, and that the Mendoza Company is co
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Description: Assume that it is January 1, 2022, and that the Mendoza Company is considering the replacement of a machine that has been used forthe past 3 years in a special project for the company. This project is expected to continue for an additional 5 years (

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Assume that it is January 1, 2022, and that the Mendoza Company is considering the replacement of a machine that has been used for the past 3 years in a special project for the company. This project is expected to continue for an additional 5 years (i.e., until the end of 2026). Mendoza will either keep the existing machine for another 5 years (8 years total) or replace the existing machine now with a new model that has a 5-year estimated life. Pertinent facts regarding this decision are as follows: Purchase price of machine (including transportation, setup charges, etc.) Useful life (determined at time of acquisition) Estimated salvage value, end of 2026* Expected cash operating costs, per year: Variable (per unit produced/sold) Fixed costs (total) Estimated salvage (terminal) values: January 1, 2022 December 31, 2026 Net working capital committed at time of acquisition of existing machine (all fully recovered at end of project, December 31, 2026) Incremental net working capital required if new machine is purchased on January 1, 2022 (all fully recovered at end of project, December 31, 2026) Expected annual volume of output/sales (in units), over the period 2022 to 2026 *Note: These amounts are used for depreciation calculations. Keep Existing Machine $ 165,000 8 years $ 21,500 $ 0.40 $ 26,500 $ 69,500 $ 14,250 $ 31,500 Purchase New Machine $ 205,000 $ 26,500 5 years $ 0.34 $ 25,500 $ 25,000 $ 11,500 515,000 515,000 Assume further that Mendoza is subject to a 30% income tax, for both ordinary income and gains/losses associated with disposal of machinery, and that all cash flows occur at the end of the year, except for the initial investment. Assume that straight-line depreciation is used for tax purposes and that any tax associated with the disposal of machinery occurs at the same time as the related transaction. Required: 1. Determine relevant cash flows (after-tax) at the time of purchase of the new machine (i.e., time 0: January 1, 2022). 2. Determine the relevant (after-tax) cash inflow each year of project operation (i.e., at the end of each of years 1 through 5). 3. Determine the relevant (after-tax) cash inflow at the end of the project's life (i.e., at the project's disposal time, December 31, 2026). 5. Determine the undiscounted net cash flow (after tax) for the new machine and determine whether, on this basis, the old machine should be replaced. Show Transcribed Text C (For all requirements, do not round intermediate calculations. round your answers to the nearest whole dollar amount.) 1. Net cash flow (after-tax), time 0 (i.e., at purchase point) 2. Net cash inflow (after-tax), during the project operation 3. Net cash inflow (after-tax), at the end of the project's life Undiscounted net cash flow (after tax) for the new machine 5 сл