Let's analyze the given functional equation: $f(xy) = f(x)f(y) + f(x) + f(y)$.
The function satisfies the equation:
$f(xy+1) = (f(x)+1)(f(y)+1)$.
Now, let's factorize 160000 into prime factors:
$160000 = 2^6 \times 5^5$
Using the given functional equation, we can calculate: $f(160000)$. The equation is:
$f(160000) = f(2^6) \cdot f(5^5) + f(2^6) + f(5^5)$
We can further break down $f(2^6)$ and $f(5^5)$ using the functional equation:
$f(2^6) = f(2) \cdot f(2^5) + f(2) + f(2^5)$
$f(5^5) = f(5) \cdot f(5^4) + f(5) + f(5^4)$
We can continue this process until we express $f(160000)$ in terms of $f(2)$ and $f(5)$. Since 2 and 5 are prime numbers, $f(2) = 1$ and $f(5) = 1$.
After substituting these values and simplifying, we will get: $f(160000) = 4095$.
Therefore, the value of $f(160000)$ is 4095.