Expansion versus replacement cash flows Tesla Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These cash flows are summarized in the following table. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Initial investment Year 1 2 3 4 5 *After-tax cash inflow expected from liquidation. Year 0 1 2 3 4 LO 5 $ a. Calculate the relevant cash flows for this replacement decision: (Round to the nearest dollar.) Project A - $4,651,000 Relevant Cash Flows $ $ $ $ $ Project B $1,558,000* Operating cash flows $568,000 917,000 1,356,000 2,223,000 3,402,000 $374,000 374,000 374,000 374,000 374,000
Expansion versus replacement cash flows Tesla Systems has estimated the cash flows over the 5-year lives for two projects, A and B. These cash flows are summarized in the following table. (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Initial investment Year 1 2 3 4 5 *After-tax cash inflow expected from liquidation. Year 0 1 2 3 4 LO 5 $ a. Calculate the relevant cash flows for this replacement decision: (Round to the nearest dollar.) Project A - $4,651,000 Relevant Cash Flows $ $ $ $ $ Project B $1,558,000* Operating cash flows $568,000 917,000 1,356,000 2,223,000 3,402,000 $374,000 374,000 374,000 374,000 374,000
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Expansion versus replacement cash flows Tesla Systems has estimated the cash flows over the 5-year lives for two projects, A and B.
These cash flows are summarized in the following table. (Click on the icon here in order to copy the contents of the data table below into
a spreadsheet.)
Initial investment
Year
1
2
3
4
5
*After-tax cash inflow expected from liquidation.
LO
Year
0
1
$
2 $
3
4
5
GA
a. Calculate the relevant cash flows for this replacement decision: (Round to the nearest dollar.)
GA
Project A
- $4,651,000
Relevant
Cash Flows
SA
$568,000
917,000
1,356,000
2,223,000
3,402,000
Project B
$1,558,000*
Operating cash flows
$374,000
374,000
374,000
374,000
374,000
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