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Terminal cash flow Replacement decision Russell Industries is considering replacing a fully depreciated machine that...

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Terminal cash flow Replacement decision Russell Industries is considering replacing a fully depreciated machine that has a remaining useful life of 10 years with a newer, more sophisticated machine. The new machine will cost $210,000 and will require $20 600 in installation costs it will be depreciated under MACRS using a 5-year recovery period (soe the table for the applicable depreciation percentages) A $20,000 increase in net working capital wil be requred to support the new machine. The firm's managers plan to evaluate the potontial replacement over a 4-year period They estimate that the old machine could be sold at the end of 4 years to net $14600 before taxes, the new machine at the end of 4 years will be worth $75,000 before taxes Calculate the terminal cash flow at the end of year 4 that is relevant to the proposed purchase of the new machine. The tim is subject to a 40% tax rate The termin cash flow for the replacement decision is shown below (Round to the nearest collar) Proceed from sale of new machine 75000 Tax on sale of new machine Total after tax proceeds new asset Proceeds from sale of old machine $ Thix on sale of old machine Total after to proceeds-old asset Change in networking capital Terminal cash flow

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