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XYZ Company is considering whether it is worth investing in a project requiring the purchase of...

XYZ Company is considering whether it is worth investing in a project requiring the purchase of new equipment. The cost of a new machine is $340,000, including shipping and installation. The project will increase annual revenues by $400,000 and annual costs by $100,000. The machine will be depreciated via straight-line depreciation for three years to a salvage value of
$40,000. If the firm does this project, $30,000 in net working capital will be required and will be fully recaptured at the end of the project. The estimated salvage value of the machine after the project is $30,000. What is the terminal value of this project if the tax rate is 40%?

  • $66,000
  • $44,000
  • $34,000
  • $48,000
  • $64,000
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