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 203,000 will require 29,300 in installation costs. it will be depreciated under MACRS using a 5 year recovery. (See the table for the applicable depreciation percentages). a 27,000 increase in networking capital will be required to support the new machine the firms managers plan to evaluate the potential replacement over a 4 year period. They estimate that the old machine could be sold at the end of 4 years to net 16,600 before taxes; the new machine at the end of 4 years will be worth 74,000 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 firm is subject to a 40% tax rate.

$ od will require $29,300 in installation costs. It will be depreciated under MACRS using a me new machine. The firm's managers plan to evaluate the potential replacement over a 4. will be worth $74,000 before taxes. Calculate the terminal cash flow at the end of year 4 the The terminal cash flow for the replacement decision is shown below: (Round to the nearest Proceeds from sale of new machine $ Tax on sale of new machine Total after-tax proceeds-new asset Proceeds from sale of old machine Tax on sale of old machine Total after-tax proceeds-old asset Change in net working capital Terminal cash flow CA $ Enter any number in the edit fields and then click Check Answer All parts showing esc Bu COD s is considering replacing a fully depreciated machine that has a remaining useful life of 10 years with a newer i Data Table (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% 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. Print Done Check