Answer :
Strong Tool Company is considering purchasing a new lathe to replace a fully depreciated lathe, providing potential operating cash inflows for the next five years.
Strong Tool Company's decision to purchase a new lathe presents an opportunity for potential operating cash inflows over the next five years. By replacing the fully depreciated lathe, the company can benefit from improved efficiency, productivity, and possibly reduced maintenance costs.
The new lathe is expected to have a lifespan of five years, which means it will contribute to the company's operations and generate cash inflows during this period. The exact amount of cash inflows will depend on various factors, such as increased production capacity, cost savings, and potential revenue growth resulting from enhanced capabilities.
By investing in the new lathe, Strong Tool Company aims to generate positive cash flows from its operations. These cash inflows can be used to cover operating expenses, invest in further growth opportunities, or provide returns to shareholders.
However, the specific details of the operating cash inflows, including their magnitude and timing, are not provided in the question. To assess the financial viability of the lathe purchase, a comprehensive analysis would be required, considering factors such as cost projections, market demand, and potential risks.
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