Looner Industries is currently analyzing the purchase of a new machine that costs $ 159,000 and requires $ 19,500 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $ 29,800 to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a 5-year recovery period

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%	10%
2	45%	32%	25%	18%
3	15%	19%	18%	14%
4	7%	12%	12%	12%
5		12%	9%	9%
6		55%	9%	8%
7			9%	7%
8			4%	6%
9				6%
10				6%
11				4%
Totals	100%	100%	100%	100%

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) $ 8,925 or (2) $ 169,300 (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. The following table can be used to solve for the terminal cash flow:(Round to the nearest dollar.) 3-year Proceeds from sale of proposed asset $ +/- Tax on sale of proposed asset $ Total after-tax proceeds-new $ + Change in net working capital $ Terminal cash flow $