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 $196,000 and will require $30,400 in installation cost. It will be depreciated under MACRS using a 5-year recovery period:

Year-1: 20%

Year-2: 32%

Year-3: 19%

Year-4: 12%

Year-5: 12%

Year-6: 5%

A $28,000 increase in net working capital will be required to support the new machine. The firm's management plans to evaluate the potential replacement over a 4-year period. They estimate that the old machine could be sold at the end of the 4 years to net $16,600 before taxes, the new machine at the end of 4 years will be worth $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% tax rate.

a) Proceeds from sale of new machine?

b) Tax on sale of new machine?

c) Total after tax proceeds new-asset?

d) Proceeds from sale of old machine?

e) Tax on sale of old machine?

f) Total after tax proceeds old asset?

g) Change in net working capital?

h) Terminal cash flow?