Assume that a firm expects to be able to liquidate the new machine, which cost $400, 000, at the end of its 5- year usable life to net $42, 000 after paying removal and cleanup costs. Had it not been replaced by the new machine, the old machine, which initially cost $240,000 and was used for 3 years before being replaced, would have been liquidated at the end of the 5 years (i. e., the same time the new machine is liquidated) to net $ 10,000. The firm expects to recover its $17,000 net working capital investment upon termination of the project. The firm pays taxes at a rate of 40%. The firm depreciated both machines using a 5-yr MACR schedule as follows: 20%, 32%, 19%, 12%, 12%, 5%. Calculating the terminal cash flow for this machine.
Assume that a firm expects to be able to liquidate the new machine, which cost $400, 000, at the end of its 5- year usable life to net $42, 000 after paying removal and cleanup costs. Had it not been replaced by the new machine, the old machine, which initially cost $240,000 and was used for 3 years before being replaced, would have been liquidated at the end of the 5 years (i. e., the same time the new machine is liquidated) to net $ 10,000. The firm expects to recover its $17,000 net working capital investment upon termination of the project. The firm pays taxes at a rate of 40%. The firm
terminal cash flow for this machine.
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