Terminal cash flowVarious lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $155,000 and requires $19,700 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $30,300 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 $10,100 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. c. Assuming a 5-year usable life, calculate the terminal cash'flow if the machine were sold to net (1) $8,735 or (2) $170,700 (before taxes) at the end of 5 years. d. Discuss the effect of sale price on terminal cash flow using your findings in parte. a. Calculate the terminal cash flow for a usable life of (1) 3 years, (2) 5 years, and (3) 7 years. The following table can be used to solve for the terminal cash flow: (Round to the nearest dollar) 3.year $ $ Proceeds from sale of proposed asset +- Tax on sale of proposed asset Total after-tax proceeds-new + Change in net working capital $ $ $ Terminal cash flow (Round to the nearest dollar.) Terminal cash flow-Various lives and sale prices Looner Industries is curre increase in net working capital of $30,300 to support the expanded level of opera expects to sell the machine to net $10,100 before taxes at the end of its usable lit a. Calculate the terminal cash flow for a usable life of (1) 3 years, (2) 5 years, an b. Discuss the effect of usable life on terminal cash flows using your findings in pa C. Assuming a 5-year usable life, calculate the terminal cash flow if the machine d. Discuss the effect of sale price on terminal cash flow using your findings in part 5-year Proceeds from sale of proposed asset +- Tax on sale of proposed asset Total after-tax proceeds-new + Change in net working capital $ $ $ $ GA Terminal cash flow (Round to the nearest dollar.) 7-year $ Proceeds from sale of proposed asset +- Tax on sale of proposed asset Total after-tax proceeds-new + Change in net working capital $ $ GA Terminal cash flow EA b. Discuss the effect of usable life on terminal cash flows using your findings in part a Enter any number in the edit fields and then continue to the next question. UULUJ This Question: 50 pts 4 of 4 (2 complete Terminal cash flow-Various lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $155,000 and requires $19,700 in installation costs. Purchas increase in net working capital of $30,300 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 expects to sell the machine to net $10,100 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 parta C. Assuming a 5-year usable life, calculate the terminal cash flow if the machine were sold to not (t) $8,735 or (2) $170.700 (before tas) at the end of 5 years. d. Discuss the effect of sale price on terminal cash flow using your findings in parte. Terminal cash flow b. Discuss the effect of usable life on terminal cash flows using your findings in parta. (Select from the drop down menus) If the usable life is than the normal recovery period, the asset has not been depreciated fully and a tax benefit may be taken on the therefore, the terminal cash flow is c. Assuming a 5-year unable life, calculate the terminal cash flow if the machine were sold to net (1)$8,735 or (2) $170,700 (before taxes) at the end of 5 years The following table can be used to solve for the terminal cash flow: (Round to the nearest dollar) (1) Proceeds from sale of proposed asset S +/- Tax on sale of proposed asset Total after-tax proceeds-new $ + Change in net working capital $ Terminal cash flow (Round to the nearest dollar.) (2) Proceeds from sale of proposed asset $ Enter any number in the edit fields and then continue to the next question MacBook AS GA $ Total after-tax proceeds-new + Change in net working capital Terminal cash flow (Round to the nearest dollar.) $ + $ $ (2) Proceeds from sale of proposed asset +/- Tax on sale of proposed asset Total after-tax proceeds-new + Change in net working capital Terminal cash flow d. Using your findings in part c., what is the effect of sale price on terminal cash flows? (Select from the drop-down menus.) The the sale price, the higher the terminal cash flow. $ Enter any number in the edit fields and then continue to the next question. MacBook Air i Data Table m (Click on the icon located on the top-right corner of the data table below in order to copy its contents 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 33% 20% 14% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 7% 12% 12% 12% 5 12% 9% 9% 6 8% 7 9% 7% 8 4% 6% 6% 10 6% 11 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while 4 5% 9% 9 ice Print Done V. the neytuestion