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P3 Operating cash flows. Strong Tool Partners 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 $2,000 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 and interest) for the new and the old lathes to be as shown in the table below. The firm is subject to a 40% tax rate. a. b. C. Year 1 23 3 4 5 Sheet1 Recovery year Answer - fill in the blue boxes below. Table 4.2 Revenue $40,000 41,000 42,000 1234567 43,000 44,000 7 8 9 + Calculate the operating cash flows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) Calculate the operating cash flows resulting from the proposed lathe replacement. Depict on a timeline the operating cash flows calculated in part b. 3 years 33% 45% New lathe depreciation and interest) $30,000 30,000 30,000 30,000 30,000 15% 7% Percentage by recovery year 7 years 14% 25% 5 years 20% 32% 19% 12% 12% 5% 18% 12% 9% 9% 9% 4% Revenue $35,000 35,000 35,000 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 35,000 35,000 Old lathe depreciation and interest) $25,000 25,000 25,000 Tax rate 25,000 25,000 40%

P3 Operating cash flows. Strong Tool Partners 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 $2,000 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 and interest) for the new and the old lathes to be as shown in the table below. The firm is subject to a 40% tax rate. a. b. C. Year 1 23 3 4 5 Sheet1 Recovery year Answer - fill in the blue boxes below. Table 4.2 Revenue $40,000 41,000 42,000 1234567 43,000 44,000 7 8 9 + Calculate the operating cash flows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) Calculate the operating cash flows resulting from the proposed lathe replacement. Depict on a timeline the operating cash flows calculated in part b. 3 years 33% 45% New lathe depreciation and interest) $30,000 30,000 30,000 30,000 30,000 15% 7% Percentage by recovery year 7 years 14% 25% 5 years 20% 32% 19% 12% 12% 5% 18% 12% 9% 9% 9% 4% Revenue $35,000 35,000 35,000 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 35,000 35,000 Old lathe depreciation and interest) $25,000 25,000 25,000 Tax rate 25,000 25,000 40%

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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AutoSave OFF Home Insert Draw fx Insert Function C153 164 165 166 167 168 169 170 171 172 ja. 173 b. 178 179 180 181 A 182 183 184 185 186 187 188 189 Σ. AutoSum Recently Financial Logical Used × ✓ fx B Year 1 2 3 4 Sheet1 Table 4.2 2. C Page Layout Recovery year 174 C. 175 176 Answer - fill in the blue boxes below. 177 2 3 V 5 6 ? 780 V C Formulas Data A Text 154 155 P3 Operating cash flows. Strong Tool Partners has been considering purchasing a new lathe to replace a fully depreciated lathe that would otherwise lasti 156 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,000 in year 1; $3,200 in year 2; $1,900 in year 3; $1,200 in 157 both year 4 and year 5; and $500 in year 6. The firm estimates the revenues and expenses (excluding depreciation and interest) for the new and the old 158 lathes to be as shown in the table below. The firm is subject to a 40% tax rate. 159 160 161 162 163 Revenue $40,000 41,000 42,000 43,000 44,000 15% 7% 3 years 33% 45% Ꮎ Date & Lookup & Math & Time Reference Trig D Select destination and press ENTER or choose Paste Review View More Functions E New lathe depreciation and interest) $30,000 30,000 30,000 30,000 30,000 5 years 20% 32% 19% 12% Calculate the operating cash flows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) Calculate the operating cash flows resulting from the proposed lathe replacement. Depict on a timeline the operating cash flows calculated in part b. 12% 5% Percentage by recovery year 7 years 14% 25% Tell me Name Manager 18% 12% 9% 9% 9% 4% F FIN520 - Week 5 Coursework (Your Name) ✓ 10 years 10% 18% Define Name ✓ Use in Formula v Create from Selection 14% 12% 9% 8% 7% 6% 6% G Trace Precedents Trace Dependents Vfx A GƏ Error Watch Remove Arrows ✓ Formulas Checking Window Show Revenue $35,000 35,000 35,000 35,000 35,000 H Old lathe depreciation and interest) $25,000 25,000 25,000 25,000 25,000 Tax rate J 40% I I I I I I I I I 1 I I I I 1 I I I I I I I T I I + I I I I I + I I I I I I + I I I I I | I I I 1 I + I Calculation Options K L Calculate Now Calculate Sheet M = B N Al I Comments O P 0% Share 139% Q
Transcribed Image Text:AutoSave OFF Home Insert Draw fx Insert Function C153 164 165 166 167 168 169 170 171 172 ja. 173 b. 178 179 180 181 A 182 183 184 185 186 187 188 189 Σ. AutoSum Recently Financial Logical Used × ✓ fx B Year 1 2 3 4 Sheet1 Table 4.2 2. C Page Layout Recovery year 174 C. 175 176 Answer - fill in the blue boxes below. 177 2 3 V 5 6 ? 780 V C Formulas Data A Text 154 155 P3 Operating cash flows. Strong Tool Partners has been considering purchasing a new lathe to replace a fully depreciated lathe that would otherwise lasti 156 5 more years. The new lathe is expected to have a 5-year life and depreciation charges of $2,000 in year 1; $3,200 in year 2; $1,900 in year 3; $1,200 in 157 both year 4 and year 5; and $500 in year 6. The firm estimates the revenues and expenses (excluding depreciation and interest) for the new and the old 158 lathes to be as shown in the table below. The firm is subject to a 40% tax rate. 159 160 161 162 163 Revenue $40,000 41,000 42,000 43,000 44,000 15% 7% 3 years 33% 45% Ꮎ Date & Lookup & Math & Time Reference Trig D Select destination and press ENTER or choose Paste Review View More Functions E New lathe depreciation and interest) $30,000 30,000 30,000 30,000 30,000 5 years 20% 32% 19% 12% Calculate the operating cash flows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) Calculate the operating cash flows resulting from the proposed lathe replacement. Depict on a timeline the operating cash flows calculated in part b. 12% 5% Percentage by recovery year 7 years 14% 25% Tell me Name Manager 18% 12% 9% 9% 9% 4% F FIN520 - Week 5 Coursework (Your Name) ✓ 10 years 10% 18% Define Name ✓ Use in Formula v Create from Selection 14% 12% 9% 8% 7% 6% 6% G Trace Precedents Trace Dependents Vfx A GƏ Error Watch Remove Arrows ✓ Formulas Checking Window Show Revenue $35,000 35,000 35,000 35,000 35,000 H Old lathe depreciation and interest) $25,000 25,000 25,000 25,000 25,000 Tax rate J 40% I I I I I I I I I 1 I I I I 1 I I I I I I I T I I + I I I I I + I I I I I I + I I I I I | I I I 1 I + I Calculation Options K L Calculate Now Calculate Sheet M = B N Al I Comments O P 0% Share 139% Q
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