$ Terminal cash flow-Various lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $162,000 and requires $19,600 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 5-year recovery period (see the table for the applicable depreciation percentages) and expects to sell the machine to net $10,200 before taxes at the end of its usable life. The firm is subject to a 40% tax rate. a. Calculate the terminal cash flow for a usable life of (1) 3 years, (2) 5 years, and (3) 7 years b. Discuss the effect of usable life on terminal cash flows using your findings in part a. Data Table C. Assuming a 5-year usable life, calculate the terminal cash flow if the machine were sold to net (1) $9,080 or (2) $169,000 (before taxes) at the end of 5 years. d. Discuss the effect of sale price on terminal cash flow using your findings in part c. a. Calculate the terminal cash flow for a usable life of (1) 3 years, (2) 5 years, and (3) 7 years (Click on the icon located on the top-right corner of the data table below in order to copy its contents into a The following table can be used to solve for the terminal cash flow: (Round to the nearest dollar.) spreadsheet.) Rounded Depreciation Percentages by Recovery Year Using MACRS for 3-year First Four Property Classes Proceeds from sale of proposed asset $ Percentage by recovery year Recovery year 3 years 5 years 7 years 10 years +/- Tax on sale of proposed asset 1 33% 14% Total after-tax proceeds-new $ 2 45% 32% 25% 18% + Change in net working capital $ 3 15% 19% 18% 14% 7% 12% 12% 12% Terminal cash flow 12% 9% 9% 9% 8% 9% 7% 4% 6% 9 6% 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 or directly apply double-declining balance (200%) depreciation using the half-year convention 20% 10% 4 5 6 7 8