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 $$191,000$ and will require $$30,900$ in installation costs. It will be depreciated under MACRS using a $5-$year recovery period $($see the table $$ for the applicable depreciation percentages$).$ A $$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 $$15,700$ before taxes; the new machine at the end of $4$ years will be worth $$71,000$ 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 bele

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

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Data table

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Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes

$\backslash$table$[[,,$Percentage by recovery year$*,],[$Recovery year,$3$ years,$5$ years,$7$ years$],[1,33\%,20\%,14\%$