Terminal cash flow:Various lives and sale pricesLooner Industries is currently analyzing the purchase of a new machine that costs $164,000 and requires $19,500 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $29,800 to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a five-year recovery period

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%
4	7%	12%	12%	12%
5		12%	9%	9%
6		5%	9%	8%
7			9%	7%
8			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.

a. Calculate the terminal cash flow for a usable life of (1) three years, (2) five years, and (3) seven years.

b. Discuss the effect of usable life on terminal cash flows using your findings in part a.

c.Assuming a five-year usable life, calculate the terminal cash flow if the machine were sold to net (1) $9,175 or (2) $169,300 (before taxes) at the end of five years.

d. Discuss the effect of sale price on terminal cash flow using your findings in part c.