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mane Integrative Determining relevant cash flown Lombard Company is contemplating the purchase of a new high-speed widget grinder to replace the existing prinder. The existing grinder was purchased 2 years ago at an installed cost of $60,000, it was being deprecated under MAGRS using a 5-year recovery period. The existing grinder is expected to have a usable We of more years. The new grinder costs $105.000 and requires $5,600 in installation cont; it has a 5 year usable le and would be depreciated under MACRS using a 5-year recovery period. Lombard can currently sell the existing grinder for $70,100 without incurring any removal or cinarup costs. To support the increased business resulting from purchase of the new grinder, mocounts receivable would increase by $39.500, inventories by 530,700, and accounts paynble by $68,000. At the end of 5 years, the exsting grinder would have a market value of zero the new grinder would be sold to not $29.800 after removal and cleanup costs and before takes. The firm is subject a 40% tax rato. The estimated earrings before depreciation, Interest, and takes over the years for both the new and the existing grinder are shown in the following table (Table contain the applicable MACRS depreciation percentages) - Calculate the initial investment associated with the replacement of the existing grinder by the new one. b. Determine the increment operating cash inflows associated with the proposed grinder replacement. (Note: Be sure to consider the depreciation in year 6.) c. Determine the terminal cash flow expected at the end of years from the proposed grinder replacement d. Depict on a time in the relevant cash Rows associated with the proposed grinder replacement decision 1 2 con end of year + a. Calculate the initial investment associated with replacement of the old machine by the new one. Calculate the initial investment below (Round to the nearest dollar) Cost of new asset 105,800 Installation costs 5,500 Total cost of new asse! 111300 Proceeds from sale of old asset $ 70100 Tax on sale of old asset Total proceeds sale of oid asset ciation sts, it has a 5-year us Data table and would be depreciated under MA cleanup costs. To support their and accounts payable by $58,0 removal and cleanup costs and both the new and the existing a. Calculate the initial investme b. Determine the incremental o c. Determine the terminal cash d. Depict on a time line the rele incurring any removal 9.500, inventories by De sold to net $29,800 nd taxes over the 5 ye roentages.) pepreciation in year 6 (Click on the icon located on the top-right comer of the data table below in order to copy its contents into a spreadsheet.) Earnings before depreciation, Interest, and taxes Year New grinder Existing grinder $43,700 $26,700 2 43,700 24,700 43,700 22,700 43,700 20,700 43,700 18,700 1 a. Calculate the initial investme 3 4 5 Calculate the initial investment Cost of new asset Installation costs Print Done Total cost of new asset Proceeds from sale of old Tax on sale of old asset mane Integrative Determining relevant cash flown Lombard Company is contemplating the purchase of a new high-speed widget grinder to replace the existing prinder. The existing grinder was purchased 2 years ago at an installed cost of $60,000, it was being deprecated under MAGRS using a 5-year recovery period. The existing grinder is expected to have a usable We of more years. The new grinder costs $105.000 and requires $5,600 in installation cont; it has a 5 year usable le and would be depreciated under MACRS using a 5-year recovery period. Lombard can currently sell the existing grinder for $70,100 without incurring any removal or cinarup costs. To support the increased business resulting from purchase of the new grinder, mocounts receivable would increase by $39.500, inventories by 530,700, and accounts paynble by $68,000. At the end of 5 years, the exsting grinder would have a market value of zero the new grinder would be sold to not $29.800 after removal and cleanup costs and before takes. The firm is subject a 40% tax rato. The estimated earrings before depreciation, Interest, and takes over the years for both the new and the existing grinder are shown in the following table (Table contain the applicable MACRS depreciation percentages) - Calculate the initial investment associated with the replacement of the existing grinder by the new one. b. Determine the increment operating cash inflows associated with the proposed grinder replacement. (Note: Be sure to consider the depreciation in year 6.) c. Determine the terminal cash flow expected at the end of years from the proposed grinder replacement d. Depict on a time in the relevant cash Rows associated with the proposed grinder replacement decision 1 2 con end of year + a. Calculate the initial investment associated with replacement of the old machine by the new one. Calculate the initial investment below (Round to the nearest dollar) Cost of new asset 105,800 Installation costs 5,500 Total cost of new asse! 111300 Proceeds from sale of old asset $ 70100 Tax on sale of old asset Total proceeds sale of oid asset ciation sts, it has a 5-year us Data table and would be depreciated under MA cleanup costs. To support their and accounts payable by $58,0 removal and cleanup costs and both the new and the existing a. Calculate the initial investme b. Determine the incremental o c. Determine the terminal cash d. Depict on a time line the rele incurring any removal 9.500, inventories by De sold to net $29,800 nd taxes over the 5 ye roentages.) pepreciation in year 6 (Click on the icon located on the top-right comer of the data table below in order to copy its contents into a spreadsheet.) Earnings before depreciation, Interest, and taxes Year New grinder Existing grinder $43,700 $26,700 2 43,700 24,700 43,700 22,700 43,700 20,700 43,700 18,700 1 a. Calculate the initial investme 3 4 5 Calculate the initial investment Cost of new asset Installation costs Print Done Total cost of new asset Proceeds from sale of old Tax on sale of old asset

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