Estimate the revenue and expenses of equipment, Business Management

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Existing machine

Purchased 3 years ago

Cost=22,000

Installation= 3000

Depreciation=3 years using the MACRS - 5 year

Recovery schedule

Current market value=10,000

Five year usable life remaining

Proposed machine

Cost= 45,000

Installation = 3000

Depreciation using MACRS 5-year recovery schedule

Five year usable life expected

The firm estimate the revenue and expenses for the proposed and existing equipment to be shown in the following table:

Proposed machine Existing Machine

Year Revenue Expenses year Revenue Expenses

1 62000 42000 1 47000 27000

2 68200 44100 2 50800 29200

3 75000 46300 3 54300 32000

4 82500 48600 4 57600 35300

5 78000 51000 5 60500 39400

The firm pays 40%taxes on income. Their firm's cost of capital is percent 14%. All dollar denominated answers are to be shown to the nearest dollar. Prepare the schedule /table of incremental cash flow for the proposed replacement project.

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