Terminal cash

flowlong dashReplacement

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

$ 201 comma 000$201,000

and will require

$ 30 comma 100$30,100

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

$ 20 comma 000$20,000

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

$ 14 comma 600$14,600

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

$ 72 comma 000$72,000

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

40 %40%

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			$

(Click on the icon here

in 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
	Percentage by recovery year*
Recovery year	3 years	5 years	7 years	10 years
1	3333%	2020%	1414%	1010%
2	4545%	3232%	2525%	1818%
3	1515%	1919%	1818%	1414%
4	77%	1212%	1212%	1212%
5		1212%	99%	99%
6		55%	99%	88%
7			99%	77%
8			44%	66%
9				66%
10				66%
11				44%
Totals	100100%	100100%	100100%	100100%
*These percentages have been rounded to the nearest whole percent to simplify calculations while 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.

Score: 0 of 1 pt 47 of 16 compte HW Score: 29.69%, 4.75 of 16 pts P11-15 (similar to) Question Help Terminal cash flow Replacement decision Ruso Industries is considering replacing a fully depreciated machine that has remaining selle of 10 years with a newer, more sophisticated machine. The new machine will cost $201.000 and will require $30,100 in a tion cost. It will be deprecated under MARS using a year recovery period to the table for the applicabile depresion personages). A $20.000 increase in networking capital will be red to support the new machine. The firm's managers plan to evaluate the potential replacement over a d-year period. They estimate that the machine could be sold at the end of years to net $14,600 before taxes, the new machine at the end of 4 years will be worth $72.000 before taxes. Calculate the terminal cash row at the end of year that is relevant to the proposed purchase of the new machine. The firm is subject to a 40% tax rate The bominalchow for the replacement decision is shown below (Pound to the dollar Proceeds from sale of new machine s A Data Table (Click on the icon here in order to copy the content of the datatable below into a spreadshot) Tex on sale of new machine Total proce s s Proceeds from sale for machine Tax one of machine Total proceso Change in networking capital Termine cash flow Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year 3 years 7 years "These percentages have been founded to the nearest whole percent to m y G o ns while reining room, Too te the actual depreciation for purposes, be sure to ply the urrounded percentages of drely apply outdong Dance (200 depreciation using the hall year Goren fields and then click Check Emery number in the All parts showing Check