hhe to buy incremental operating cash flo s Reas and Lr da Thom son operate a lo

Question

hhe to buy incremental operating cash flo s Reas and Lr da Thom son operate a locata n marte aro* sence for com eraai and feudenta property They have been using * John Deseeriding mow?fer P* past severw years and beleve san anew one They woulke to know ne ncremental relevant] cashfows associated with the replacem ertofthe old nag mivet The folowng data ar avalate 1. There are 5 2. The oid mower has a zero book value 3 The ne-mover?expected to last 5 years 4 The Thomsons wgtIowa5-year MACRS?recovery penedforthenew mover 5. Depreciable valua of the new lawn mower is $1,860 7 The n? mower expected to be more ne-encet maneuverable and w·reare less mantenance tha, he previous models which stold res ' n reduced operating expenses of S502 per year The Thomsons will buy a maintenance contract that calls for annual payments of $124 for the expected ide of the mower Creane an incremental operating cash fow statement for the replacement of Richand and Linda's Round to the nearest dolar) Data Table Richard and Linda Thomson Incremental Operating Cash Flow of John Deere (Cick onthe oon located onth*teongm corner ofthe data tab" beow order tocopy its cortens Rounded Depreciation Percentages by Recovery Year Using MACRS for Fst Four Property Casses avings om new and improved mower e Anval manance co Leis Depreciation avings 0oss) before taxs Taas (40%) 0% 5% incremental operating cash ow 6% Enter any mber inthe edt felds and then continue to ?next question

Explanation / Answer

Saving from New and Improved Mover 502 Less Annual Maintenance Cost 124 Less Depreciation 1850*19% 352 Saving before Taxes 27 Taxes 40% 11 Savings after Taxes 16 Incremental operating Cash flow 16+352 367

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