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Can you please help me solve all the parts in this question ? (a, b, c, d) Terminal cash flow: Various lives and sale prices
Can you please help me solve all the parts in this question ? (a, b, c, d)
Terminal cash flow: Various lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $158,000 and requires $19,600 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $30,100 to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a five-year recovery period (see the table for the applicable depreciation percentages) and expects to sell the machine to net $9,800 before taxes at the end of its usable life. The firm is subject to a 21% tax rate. a. Calculate the terminal cash flow for a usable life of (1) three years, (2) five years, and (3) seven years. b. Discuss the effect of usable life on terminal cash flows using your findings in part a. c. Assuming a five-year usable life, calculate the terminal cash flow if the machine were sold to net (1) $8,880 or (2) $169,700 (before taxes) at the end of five years. d. Discuss the effect of sale price on terminal cash flow using your findings in part c. a. Calculate the terminal cash flow for a usable life of (1) 3 years, (2) 5 years, and (3) 7 years. The following table can be used to solve for the terminal cash flow: (Round to the nearest dollar.) Data table (Click on the icon here in order to copy the contents of the data table below into a spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes These percentages have been rounded to the nearest whole percent to simplify calculations while retaining realism. To calculate the actual depreciation for tax purposes, be sure to apply the actual unrounded percentages or directly apply double-declining balance (200%) depreciation using the half-year conventionStep by Step Solution
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