prices Looner Industries is currently analyzing the purchase of a
new machine that costs $155,000 and requires $20,200 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
for the applicable depreciation percentages) and expects to
sell the machine to net $10,000 before taxes at the end of its
usable life. The firm is subject to a 21% tax rate.
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) $8,760
or (2) $169,800 (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.
- Terminal Cash Flow Various Lives And Sale Prices Looner Industries Is Currently Analyzing The Purchase Of A New Mac 1 (151.16 KiB) Viewed 34 times
Data table 5 years 14% Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 7 years 10 years 1 33% 20% 10% 2 45% 32% 25% 18% 3 15% 19% 18% 14% 4 7% 12% 12% 12% 12% 5 9% 9% 5% 6 9% 8% 9% 7% 4% 6% 8 6% 9 6% 10 40 11 Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while co Print Done
Wifen IRRES Alnudate the terminal nonh Aufnen unnhi. 16. nf 711 thran voor anders SAAR 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 1 +/- Tax on sale of proposed asset Total after-tax proceeds-new + Change in net working capital $ $ Terminal cash flow 5 Help me solve this View an example Ask my instructor 0 Type here to search