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Integrative: Determining relevant cash flows Lombard Company is contemplating the purchase of a new high-speed widget grinder to replace the existing grinder. The existing grinder was purchased 2 years ago at an installed cost of 60,000;itwasbeingdepreciatedunderMACRSusinga5yearrecoveryperiod.Theexistinggrinderisexpectedtohaveausablelifeof5moreyears.Thenewgrindercosts60,000; it was being depreciated under MACRS using a 5 -year recovery period. The existing grinder is expected to have a usable life of 5 more years. The new grinder costs 105,000 and requires 5,000ininstallationcosts;ithasa5yearusablelifeandwouldbedepreciatedunderMACRSusinga5yearrecoveryperiod.Lombardcancurrentlyselltheexistinggrinderfor5,000 in installation costs; it has a 5-year usable life and would be depreciated under MACRS using a 5 -year recovery period. Lombard can currently sell the existing grinder for 70,000 without incurring any removal or cleanup costs. To support the increased business resulting from purchase of the new grinder, accounts receivable would increase by 40,000,inventoriesby40,000, inventories by 30,000, and accounts payable by 58,000.Attheendof5years,theexistinggrinderwouldhaveamarketvalueofzero;thenewgrinderwouldbesoldtonet58,000. At the end of 5 years, the existing grinder would have a market value of zero; the new grinder would be sold to net 29,000 after removal and cleanup costs and before taxes. The firm is subject to a 40% tax rate. The estimated earnings before depreciation, interest, and taxes over the 5 years for both the new and the existing grinder are shown in the following table.

Year New grinder Existing grinder
1 $43,000 $26,000
2 43,000 24,000
3 43,000 22,000
4 43,000 20,000
5 43,000 18,000

b. Determine the incremental operating cash flows associated with the proposed grinder replacement. (Note: Be sure to consider the depreciation in year 6.)

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Is the elastic limit a limiting force or a limiting distance?

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When a force acts on an elastic material, it deforms proportionally to the magnitude of the force, and when the force stops acting on the material, it returns to its original shape. The elasticity of a body measures the extent to which the material returns to its original shape once it is deformed.

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