The operating cash flows from the old lathe and the new lathe. Introduction: The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc. The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

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Answer 1

Question

Chapter 11, Problem 11.19P

a)

Summary Introduction

To determine:

The operating cash flows from the old lathe and the new lathe.

Introduction:

The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc.

The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

b)

Summary Introduction

To determine:

The incremental cash flows from the replacement project.

c)

Summary Introduction

To determine:

The timeline of incremental cash flows from the replacement project.

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Operating cash inflows Strong Tool Company 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 $2,220 in Year 1; $3,552 in Year 2; $2,109 in Year 3; $1,332 in both Year 4 and Year 5; and $555 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 following table. The firm is subject to a 40% tax rate on ordinary income. a. Calculate the operating cash inflows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) b. Calculate the operating cash inflows resulting from the proposed lathe replacement. c. Depict on a time line the incremental operating cash inflows calculated in part b. a. Calculate the operating cash inflows associated with the new lathe below: (Round to the nearest dollar.) Year Revenue Expenses (excluding…

Operating cash inflows Strong Tool Company 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 $2,180 in Year 1; $3,488 in Year 2; $2,071 in Year 3; $1,308 in both Year 4 and Year 5; and $545 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 following table. The firm is subject to a 40% tax rate on ordinary income. a. Calculate the operating cash inflows associated with each lathe. (Note: Be sure to consider the depreciation in year 6.) b. Calculate the operating cash inflows resulting from the proposed lathe replacement. c. Depict on a time line the incremental operating cash inflows calculated in part b. a. Calculate the operating cash inflows associated with the new lathe below: (Round to the nearest dollar.) Depreciation Net profit before taxes…

Initial cash flow: Basic calculation Cushing Corporation is considering the purchase of a new grading machine to replace the existing one. The existing machine was purchased 2 years ago at an installed cost of $20,700; it was being depreciated under MACRS using a 5-year recovery period. (See table for the applicable depreciation percentages.) The existing machine is expected to have a usable life of at least 5 more years. The new machine costs $35,000 and requires $5,300 in installation costs; it will be depreciated using a 5-year recovery period under MACRS. The existing machine can currently be sold for $24,800 without incurring any removal or cleanup costs. The firm is subject to a 21% tax rate. Calculate the initial cash flow associated with the proposed purchase of a new grading machine. The initial cash flow will be $ (Round to the nearest dollar.)

Answer 2

Question

Chapter 11, Problem 11.19P

a)

Summary Introduction

To determine:

The operating cash flows from the old lathe and the new lathe.

Introduction:

The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc.

The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

b)

Summary Introduction

To determine:

The incremental cash flows from the replacement project.

c)

Summary Introduction

To determine:

The timeline of incremental cash flows from the replacement project.

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Answer 3

Question

Chapter 11, Problem 11.19P

a)

Summary Introduction

To determine:

The operating cash flows from the old lathe and the new lathe.

Introduction:

The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc.

The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

b)

Summary Introduction

To determine:

The incremental cash flows from the replacement project.

c)

Summary Introduction

To determine:

The timeline of incremental cash flows from the replacement project.

Expert Solution & Answer

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Answer 4

Question

Chapter 11, Problem 11.19P

a)

Summary Introduction

To determine:

The operating cash flows from the old lathe and the new lathe.

Introduction:

The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc.

The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

b)

Summary Introduction

To determine:

The incremental cash flows from the replacement project.

c)

Summary Introduction

To determine:

The timeline of incremental cash flows from the replacement project.

Expert Solution & Answer

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Answer 5

Chapter 11, Problem 11.19P

a)

Summary Introduction

To determine:

The operating cash flows from the old lathe and the new lathe.

Introduction:

The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc.

The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

b)

Summary Introduction

To determine:

The incremental cash flows from the replacement project.

c)

Summary Introduction

To determine:

The timeline of incremental cash flows from the replacement project.

Answer 6

Chapter 11, Problem 11.19P

a)

Summary Introduction

To determine:

The operating cash flows from the old lathe and the new lathe.

Introduction:

The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc.

The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

Answer 7

Chapter 11, Problem 11.19P

a)

Summary Introduction

To determine:

The operating cash flows from the old lathe and the new lathe.

Introduction:

The capital budgeting is the process of making huge investments by the firms to make their capital assets grow faster such as the building of new buildings, purchase of advanced costly machineries etc.

The incremental cash flow is the additional cash flow for the firm that is generated out of the new capital investment that the firm has undertaken.

Answer 8

b)

Summary Introduction

To determine:

The incremental cash flows from the replacement project.

Answer 9

b)

Summary Introduction

To determine:

The incremental cash flows from the replacement project.

Answer 10

c)

Summary Introduction

To determine:

The timeline of incremental cash flows from the replacement project.

Answer 11

c)

Summary Introduction

To determine:

The timeline of incremental cash flows from the replacement project.

Answer 12

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Answer 13

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Answer 14

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Answer 15

Ch. 11.1 - Prob. 11.1RQ Ch. 11.1 - What three types of net cash flows may exist for a...Ch. 11.1 - Prob. 11.3RQ Ch. 11.1 - Prob. 11.4RQ Ch. 11.2 - Explain how to use each of the following inputs to...Ch. 11.2 - How do you calculate the book value of an asset?Ch. 11.2 - Prob. 11.7RQ Ch. 11.2 - Prob. 11.8RQ Ch. 11.3 - Prob. 11.9RQ Ch. 11.3 - Prob. 11.10RQ

To determine: The incremental cash flows from the replacement project.

To determine: The timeline of incremental cash flows from the replacement project.

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Chapter 11 Solutions

To determine:

The incremental cash flows from the replacement project.

To determine:

The timeline of incremental cash flows from the replacement project.