Your company is considering the purchase of a new machine Af

Your company is considering the purchase of a new machine. After 4 years of operation, you would sell the machine for a salvage value of $64406. However, at that time the machine would not have been depreciated to a value of 0, but have a remnant book value of $18542. The operation of the machine requires additional NOWC of $28125, which would not change throughout the project. The firm\'s corporate tax rate is 40%. What is the project\'s Terminal Cash Flow?

Enter your answer in dollars, rounded to 2 decimals, without the dollar sing. So, if your answer is 12,345.6789, just enter 12345.68.

Solution

Terminal cash flow = Salvage value + net working capital - tax ( salvage value - book value)

Terminal cash flow = 64406 + 28125 - 0.4( 64406 - 18542)

Terminal cash flow = 92,531 - 0.4 ( 45,864)

Terminal cash flow = 92,531 - 18,345.6

Terminal cash flow = 74,185.4