Homework: Chapter 11 Homework Save Score: 0 of 1 pt 9 of 12 (0 complete) HW Score: 0%, 0 of 12 pts P11-21 (similar to) A Question Help Terminal cash flowVarious lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $155,000 and requires $19,700 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 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) $8,735 or (2) $169,000 (before taxes) at the end of 5 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. Data Table - X The following table can be used to solve for the terminal cash flow: (Round to the nearest dollar.) 3-year $ Recovery year 1 2 $ Proceeds from sale of proposed asset +/- Tax on sale of proposed asset Total after-tax proceeds-new + Change in net working capital 3 years 33% 45% 15% 7% $ 3 4 Percentage by recovery year 5 years 7 years 20% 14% 32% 25% 19% 18% 12% 12% 12% 9% 5% 9% 9% 4% $ Terminal cash flow $ 6 7 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% 4% 100% Enter any number in the edit fields and then click Check Answer. 8 9 10 11 Totals 100% 100% 100% parts remaining