A machine costs $162,000 and reauires $20,200 in installation costs. Purchasing the machine is expected to lead to an increase in net working capital of $29,600 to support other operations. Firm plans to depreciate the machine under MACRS using 5-year recovery period (depreciation percentages shown in table below) and expects to sell the machine to net $10,300 before taxes at the end of its usable life. Firm subject to 40% tax rate

A.) Calculate terminal cash flow for a useable life of (1) 3 years (2) 5 years (3) 7 years

B.) Discuss effect of usable life on terminal cash flows using your findings in part a

C.) Assiming 5-year usable life calculate terminal cash flow if machine were sold to net (1) $9,110 or (2) $170,900 (before taxes) at the end of 5 years.

D.) Discuss effect of sale price on terminal cash flow using findings in part C.

10 years 3 years 33% 45% 15% 7% Recovery year 1 2 3 4 5 6 7 8 9 10 Percentage by recovery year 5 years 7 years 20% 14% 32% 25% 19% 18% 12% 12% 12% 9% 5% 9% 9% 4% 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% 11 10/