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1. Assume straight-line depreciation over a three year period. What is the cumulative increase or decrease in net income for the three years for each alternative?

2 Assume straight-line depreciation over a three year period. What is the total cumulative increase or decrease in cash for the three years for each alternative?

3 .If you were the sales person (Kimiyo Lee), how would respond to Mr. Park so as to get him to purchase your product?

4. Using the provided information, if possible, prepare an alternative analysis which provides a similar result.

5 Regardless of the financial analysis, what factors which effect or influence the decision to replace the equipment or stay with old (new) machine

Year 2 Year 3 Total 850,000.00 850,000.00 2,550,000.00 Yearl Income Statement Format - No change stay with current machine Revenue 850,000.00 Cost of sales Material Cost 350,000.00 Labor Cost 250,000.00 Operating Expenses 60,000.00 Other Operating Expenses 150,000.00 Depreciation 28,000.00 Operating income before tax & other gains 12,000.00 Loss (gain) on sale of assets Net Income 12,000.00 350,000.00 250,000.00 60.000.00 150,000.00 28,000.00 12,000.00 350,000.00 250,000.00 60,000.00 150,000.00 28,000.00 12,000.00 1,050,000.00 750,000.00 180,000.00 450,000.00 84,000.00 36,000.00 12,000.00 12,000.00 36,000.00 850,000.00 850,000.00 850,000.00 2,550,000.00 Income Statement Format - Purchase new-new machine Revenue Cost of sales Material Cost Labor Cost Operating Expenses Other Operating Expenses Depreciation Operating income before tax & other gains Loss (gain) on sale of assets Net Income 350,000.00 250,000.00 25,000.00 150,000.00 33,000.00 42,000.00 68,000.00 26,000.00 350,000.00 350,000.00 250,000.00 250,000.00 25,000.00 25,000.00 150,000.00 150,000.00 33,000.00 33,000.00 42.000.00 42.000.00 1,050,000.00 750,000.00 75,000.00 450,000.00 990000 126,000.00 42,000.00 42,000.00 58,000.00 850,000.00 850,000.00 850,000.00 2,550,000.00 Cash flow format. No change stay with current machine Cash receipts from sales Cash expenses Material Cost Labor Cost Operating Expenses Other Operating Expenses Total Cash Espense Depreciation Cash used to purchase machine Cash from sale of machine Net cash flow 350,000.00 250,000.00 60,000.00 150,000.00 810,000.00 350,000.00 250,000.00 60,000.00 150,000.00 810,000.00 350,000.00 250,000.00 60,000.00 150,000.00 810,000.00 1,050,000.00 750,000.00 180,000.00 450,000.00 2,430,000.00 84,000.00 84,000.00 44,000.00 40,000.00 40,000.00 36,000.00 Cash receipts from sales 850,000.00 850,000.00 850,000.00 2,550,000.00 Cash expenses Material Cost Labor Cost Operating Experses Other Operating Expenses Total cash Expense Depreciation Cash used to purchase machine Cash from sale of machine Net cash flow 350,000.00 250,000.00 25,000.00 150,000.00 775,000.00 350,000.00 250,000.00 25,000.00 150,000.00 275,000.00 350,000.00 250,000.00 25,000.00 150,000.00 775,000.00 1,050,000.00 750,000.00 75,000.00 450,000.00 2,325,000.00 99,000.00 99,000.00 16,000.00 8000 75,000.00 75,000.00 142,000.00 Year 2 Year 3 Total 850,000.00 850,000.00 2,550,000.00 Yearl Income Statement Format - No change stay with current machine Revenue 850,000.00 Cost of sales Material Cost 350,000.00 Labor Cost 250,000.00 Operating Expenses 60,000.00 Other Operating Expenses 150,000.00 Depreciation 28,000.00 Operating income before tax & other gains 12,000.00 Loss (gain) on sale of assets Net Income 12,000.00 350,000.00 250,000.00 60.000.00 150,000.00 28,000.00 12,000.00 350,000.00 250,000.00 60,000.00 150,000.00 28,000.00 12,000.00 1,050,000.00 750,000.00 180,000.00 450,000.00 84,000.00 36,000.00 12,000.00 12,000.00 36,000.00 850,000.00 850,000.00 850,000.00 2,550,000.00 Income Statement Format - Purchase new-new machine Revenue Cost of sales Material Cost Labor Cost Operating Expenses Other Operating Expenses Depreciation Operating income before tax & other gains Loss (gain) on sale of assets Net Income 350,000.00 250,000.00 25,000.00 150,000.00 33,000.00 42,000.00 68,000.00 26,000.00 350,000.00 350,000.00 250,000.00 250,000.00 25,000.00 25,000.00 150,000.00 150,000.00 33,000.00 33,000.00 42.000.00 42.000.00 1,050,000.00 750,000.00 75,000.00 450,000.00 990000 126,000.00 42,000.00 42,000.00 58,000.00 850,000.00 850,000.00 850,000.00 2,550,000.00 Cash flow format. No change stay with current machine Cash receipts from sales Cash expenses Material Cost Labor Cost Operating Expenses Other Operating Expenses Total Cash Espense Depreciation Cash used to purchase machine Cash from sale of machine Net cash flow 350,000.00 250,000.00 60,000.00 150,000.00 810,000.00 350,000.00 250,000.00 60,000.00 150,000.00 810,000.00 350,000.00 250,000.00 60,000.00 150,000.00 810,000.00 1,050,000.00 750,000.00 180,000.00 450,000.00 2,430,000.00 84,000.00 84,000.00 44,000.00 40,000.00 40,000.00 36,000.00 Cash receipts from sales 850,000.00 850,000.00 850,000.00 2,550,000.00 Cash expenses Material Cost Labor Cost Operating Experses Other Operating Expenses Total cash Expense Depreciation Cash used to purchase machine Cash from sale of machine Net cash flow 350,000.00 250,000.00 25,000.00 150,000.00 775,000.00 350,000.00 250,000.00 25,000.00 150,000.00 275,000.00 350,000.00 250,000.00 25,000.00 150,000.00 775,000.00 1,050,000.00 750,000.00 75,000.00 450,000.00 2,325,000.00 99,000.00 99,000.00 16,000.00 8000 75,000.00 75,000.00 142,000.00

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