2. Incremental costs - Initial and terminal cash flow

Consider the case of Acme Manufacturing:

Acme Manufacturing is considering a project that requires an investment in new equipment of $3,400,000, with an additional $170,000 in shipping and installation costs. Acme estimates that its accounts receivable and inventories need to increase by $680,000 to support the new project, some of which is financed by a $272,000 increase in spontaneous liabilities (accounts payable and accruals).

The total cost of Acme's new equipment is (A. 3,570,000 B. 3,978,000 . C. 680,000) and consists of the price of the new equipment plus ( A. Assets salvage value B. Assets installation, shipping, and delivery costs C. projects additional accounts receivable investment)

In contrast, Acme's initial net investment outlay is ( A. 3,978,000. B. 3,808,000.. C. 3,706,000)

Suppose Acme's new equipment is expected to sell for $400,000 at the end of its four-year useful life, and at the same time, the firm expects to recover all of its net working capital investment. The company chose to use straight-line depreciation, and the new equipment was fully depreciated by the end of its useful life. If the firm's tax rate is 40%, what is the project's total termination cash flow?

O $568,000

O $648,000

O $400,000

O $240,000