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 $200,000 and will require $31,000 in installation costs. It will be depreciated under MACRS using a 5-year

recovery period (see the table E: for the applicable depreciation percentages). A $24,000 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

$15,900 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 21% tax rate.

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

Terminal eash fow: Replacement decision Russell Industries is considering replacing a fudy depreciatod machinte that has a remaining isaful hife of 10 years with a recovery period (see the tabio IIB for for applicable depreciation percentages). A 524,000 increase in net working cepital will be required to suppont the new machine The firmis mitragers plan to evaluate the potential replacement over a 4 -year period. They ostimate that the old machine could be told at the end of 4 years to ret $15.000 before toxes; the now 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 relevinit io the proposed purchase of the new machine. The firm is subject to a 21% tax rate. The ferminal cash flow for the replacement decision is shown below: (Round to the nearest dollar.) Click on the icon here 0 . do 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 'These percentages have been rounded to the nearest whole percent to simpiry carculations wnie 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 convention