Homework: Chapter 11 Homework Save Score: 0 of 1 pt 6 of 16 (15 complete) HW Score: 82.93%, 13.27 of 16 pts P11-14 (similar to) is Question Help Terminal cash flow-Various lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $157,000 and requires $19,900 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $29.700 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 $9.700 before taxes at the end of its usable life. The firm is subject to a 40% tax rate. a. Calculate the terminal cash flow for a usable life of (1) 3 years, (2) 5 years, and (3) 7 years. b. Discuss the effect of usable life on terminal cash flows using your findings in part a. C. Assuming a 5-year usable life, calculate the terminal cash flow if the machine were sold to net (1) $8,845 or (2) $169,500 (before taxes) at the end of 5 years. d. Discuss the effect of sale price on terminal cash flow using your findings in partc. Data Table - X 10% (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 Percentage by recovery year Recovery year 3 years 5 years 7 years 10 years 1 33% 20% 14% 2 45% 32% 25% 18% 15% 19% 18% 14% 7% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 6% 10 6% 11 Totals 100% 100% 100% 3 4 9 100% Clear All Check