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Find what is the terminal year non-operating cash flow

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Reference no: EM132498284

Woodland Corporation purchased a printing machine three (3) years ago and is considering replacing it with a new one which is faster and easier to operate. The old machine has been depreciated over 3 years using straight line depreciation. Its original installation cost was $15,000. The old machine has been in use for 2 years, and it can be traded in for $3,500. The new machine will be purchased $24,000 and it will also be depreciated over 3 years using the straight line method. It is not expected to have a residual value.

Point 1: Net working capital will decrease because supply levels can be reduced by $1,500.

Point 2: Revenues will increase by $5,000 every year, it will result in labor savings of $3,000 per year due to its greater speed.

Point 3: Reducing training expenses are expected to save an additional $2,500 per year.

Point 4: The firm is in the 20% tax bracket.

Required:

Question i. Calculate the operating cash flows from years 1 to 3.

Question ii. What is the terminal year non-operating cash flow?

Reference no: EM132498284

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