Terminal cash flow: Replacement decisionRussell 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

$202,000

and will require

$30,500

in installation costs. It will be depreciated under MACRS using a 5-year recovery period (see the table

LOADING...

for the applicable depreciation percentages). A

$22,000

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

$13,700

before taxes; the new machine at the end of 4 years will be worth

$73,000

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.