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Hello, Please help me with this. Looner industries is currently analyzing the purchase of a new machine that costs $156,000 and requires $20, 100 in
Hello, Please help me with this.
Looner industries is currently analyzing the purchase of a new machine that costs $156,000 and requires $20, 100 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $30, 500 to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a 5-year recovery period (see the table for the applicable depreciation percentages) and expects to sell the machine to net $9, 600 before taxes at the end of its usable life. The firm is subject to a 40% tax rate. Calculate the terminal cash flow for a usable life or 3 years, 5 years, and 7 years. Discuss the effect of usable life on terminal cash flows using your findings in part a. Assuming a 5-year usable life, calculate the terminal cash flow if the machine were sold to net $8, 805 or $169,000 (before taxes) at the end of 5 years. Discuss the effect of sale price on terminal cash flow using your finding in part c. Calculate the terminal cash flow for a usable life of 3 years, 5 years, and 7 years. The following table can be to solve for the terminal cash flow. (Round to the nearest dollar.)Step by Step Solution
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