Terminal cash flow--Replacement decision Russell Industries is considering replacing a fully depreciated machine that has a remaining selle al 10 years with a new more sophisticated machine The new machine will cont 5990.000 and will require 530 500 in instalation com It will be depreciated under MACRS using your recovery pedod soetable for the applicable depreciation percentages) A $25.000 Increase in net wording capital will be required to support the new machine. The firm's managers plan to evaluate the potential replacement over a year period. They estimate that the old machine could be sold wed of 4 years to net 514 800 before the new machine at the end of 4 years will be worth 5/1000 beforeres Calculate the terminal cash flow at the end of year that is relevant to the proposed purchase of the new machine The line object to a 40% tax rate The terminal cash flow for the replacement decision is shown below Round to the nearest doba) Proceeds from sale of new machine Taxon machine Total y proceed Procesom saman Taxonodadi Change in wing capital Turmalm Data Table - 10 years 4 7% Roungea Depreciation Percentages by Recovery Tear Using MACRS Tor First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 1 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 12% 12% 12% 5 12% 9% 9% 6 5% 9% 8% 7 9% 7% 8 4% 6% 9 10 6% 11 4% Totals 100% 100% 100% 100% *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 of directly apply double-declining balance (200%) depreciation using the half-year 6% hen Print Done Terminal cash flow-Replacement decision Russell Industries is coming replacing a fully deprecated machine that has a mining useful life of 10 years with a new more dhe the machine wilco 190.000 550 Sin intent will be pated under MACRS sing by recovery the table for the applicate de perc) ALS niet working will be required to support the new machine Their managers and we the replacement over a period They that the old machische end of years to 14.00 before the new machine at the end of years will be worth $71000 bores Calculate the il cash flow at the end of yow 4 that are the proposedur the machine The tumis bato a 405 The terminal cash flow for the replacement decision is shown below: (Round to the nearest dolla 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 $ Enter any number in the
