Determining incremental operating cash inflows Scenic Tours, Inc., is a provider of bus to...

Determining incremental operating cash inflows Scenic Tours, Inc., is a provider of bus tours throughout the New England area. The corporation is considering the replacement of 10 of its older buses. The existing buses were purchased 4 years ago at a total cost of $2,700,000 and are being depreciated using MACRS and a 5-year recovery period (see Table 4.2, page 117). The new buses would have larger passenger capacity and better fuel efficiency as well as lower maintenance costs. The total cost for 10 new buses is $3,000,000. Like the older buses, the new ones would be depreciated using MACRS and a 5-year recovery period. Scenic is subject to a tax rate of 40%. The accompanying table presents revenues and cash expenses (excluding depreciation and interest) for the proposed purchase as well as the present fleet. Use all of the information given to calculate incremental (relevant) operating cash inflows for the proposed bus replacement.

TABLE 4.2 Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes