Terminal cash flow Replacement decision Russell Industries is considering replacing a fully depreciated machine that has a remaining useful life of 10 years with a newer, more sophisticated machine. The new machine will cost $194,000 and will require $29,700 in installation costs. It will be depreciated under MACRS using a 5-year recovery period (see the table for the applicable depreciation percentages). A $23,000 increase in net working capital will be required to support the new machine. The firm's managers plan to evaluate the potential replacement over a 4-year period. They estimate that the old machine could be sold at the end of 4 years to net $16,500 before taxes, the new machine at the end of 4 years will be worth $78,000 before taxes. Calculate the terminal cash flow at the end of year 4 that is relevant to the proposed purchase of the new machine. The firm is subject to a 40% tax rate. Data table Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Recovery year 2 4 9 10 11 Totals 3 years 33% 45% 15% 7% 100% Percentage by recovery year" 5 years 20% 32% 19% 12% 12% 5% 100% 7 years 14% 25% 18% 12% 9% 9% 9% 4% 100% 10 years 10% 18% 14% 12% 9% 8% 7% 6% 6% 6% 4% 100% I 4 old at the end X he end of year k answer The terminal cash flow for the replacement decision is shown below: (Round to the nearest dollar.) Proceeds from sale of new machine Tax on sale of new machine Total after-tax proceeds-new asset Proceeds from sale of old machine Tax on sale of old machine Total after-tax proceeds-old asset Change in net working capital Terminal cash flow S