Terminal Cash FlowVarious Lives and Sale Orices???Looner Industries is currently analyzing the purchase of a new machine that costs $161,000 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 below for the applicable depreciation? percentages) and expects to sell the machine to net $9,900

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) $9,055 or? (2) $170,600 (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.

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https://www.mathil.co homeworkld = 3860362 53&questionId= 10&flushed=true&cid=4126784¢erwin=yes Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year* 5 years 20% 32% 19% 12% 12% 5% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 10 years 10% 18% 14% 12% 9% 8% 7% 5% 6% 5% 4% 100% 3 years 33% 45% 15% 7% Recovery year 2 4 7 100% 100% 100% Totals 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 11:58 AM