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Terminal cash flow: Replacement decision Russell Industries is considering replacing a fully depreciated machine that has a remaining useful life of 1 0 years with

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 $ 199 comma 000
and will require $ 30 comma 700
in installation costs. It will be depreciated under MACRS using a5-year recovery period(see the table
LOADING...
for the applicable depreciation percentages). A $ 22 comma 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 a4-year period. They estimate that the old machine could be sold at the end of 4 years to net $ 17 comma 000
before taxes; the new machine at the end of 4 years will be worth $ 79 comma 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.

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