P11-21 (similar to) Question Help V Terminal cash flow: Various lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $163,000 and requires $19,900 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $29,900 to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a five-year recovery period (see the table for the applicable depreciation percentages) and expects to sell the machine to net $9,800 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) $9,145 or (2) $169,900 (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. P11-21 (similar to) Question Help V Terminal cash flow: Various lives and sale prices Looner Industries is currently analyzing the purchase of a new machine that costs $163,000 and requires $19,900 in installation costs. Purchase of this machine is expected to result in an increase in net working capital of $29,900 to support the expanded level of operations. The firm plans to depreciate the machine under MACRS using a five-year recovery period (see the table for the applicable depreciation percentages) and expects to sell the machine to net $9,800 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) $9,145 or (2) $169,900 (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