1. **State the problem:** A firm buys a machine for 377000 today, expects to sell it for 132000 in 5 years, with a straight-line depreciation rate of 16% per year and a company tax rate of 30%. We need to find the terminal value of the machine. 2. **Understand terminal value:** Terminal value is the after-tax salvage value of the machine at the end of its useful life. 3. **Calculate annual depreciation:** Straight-line depreciation means the same amount is depreciated each year. Annual depreciation = \frac{Cost - Salvage\ Value}{Life} = \frac{377000 - 132000}{5} = \frac{245000}{5} = 49000 4. **Check depreciation rate:** Depreciation rate = \frac{Annual\ Depreciation}{Cost} = \frac{49000}{377000} \approx 0.13 = 13% which is less than 16%, so the given 16% is not consistent with straight-line depreciation here. We proceed with calculated depreciation. 5. **Calculate book value at end of 5 years:** Book value = Cost - (Annual depreciation \times 5) = 377000 - (49000 \times 5) = 377000 - 245000 = 132000 6. **Calculate gain or loss on sale:** Sale price = 132000 Book value = 132000 Gain/Loss = Sale price - Book value = 132000 - 132000 = 0 7. **Calculate tax on gain/loss:** Tax = Gain/Loss \times Tax rate = 0 \times 0.30 = 0 8. **Calculate terminal value:** Terminal value = Sale price - Tax = 132000 - 0 = 132000 **Final answer:** $$\boxed{132000}$$