Scenic Tours Inc is a provider of bus tours. The company is considering replacing 10 of its older buses. The...

1. Scenic Tours Inc is a provider of bus tours. The company is considering replacing 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. The total cost of the new buses, which have larger passenger capacity, is $3,000,000. The new buses would also be depreciated using MACRS and a 5-year recovery period. Scenic is subject to 40% tax rate. The table below shows the revenue and cash expenses (excluding depreciation and interest) for the proposed purchase as well as the present fleet. 

Required:

Calculate incremental (relevant) operating cash flows for the proposed bus replacement.(25 marks)