Terminal cash flow: Various lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $$157,000$ and requires $$20,400$ in installation costs. Purchase of this

machine is expected to result in an increase in net working capital of $$30,400$ to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a five$-$year recovery

period $($see the table $$ for the applicable depreciation percentages$)$ and expects to sell the machine to net $$10,400$ before taxes at the end of its usable life. The firm is subject to a $21\%$ tax rate.

Question $14$

a$.$ Calculate the terminal cash flow for a usable life of $(1)$ three years, $(2)$ five years, and $(3)$ seven years.

b$.$ Discuss the effect of usable life on terminal cash flows using your findings in part a$.$

c$.$ Assuming a five$-$year usable life, calculate the terminal cash flow if the machine were sold to net $(1)$ $$8,870$ or $(2)$ $$169,400($before taxes$)$ at the end of five years.

d$.$ Discuss the effect of sale price on terminal cash flow using your findings in part c$.$

Question $15$

a$.$ Calculate the terminal cash flow for a usable life of $(1)3$ years, $(2)5$ years, and $(3)7$ years.

Data table

Rounded Depreciation Percentages by Recovery Year Using MACRS for

First Four Property Classes

Percentage by recovery year ${?}^{***}$