Incremental costs - Initial and terminal cash flow Newcastle Coal Company 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. Newcastle 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 Newcastle’s new equipment is$3,570,000 and consists of the price of the new equipment plus the asset’s installation, shipping, and delivery costs . In contrast, Newcastle’s initial investment outlay is$3,978,000 . 

Suppose Newcastle’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 operating 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? $648,000 $568,000 $400,000 $240,000

I only need answer to second part of question--first part has been solved.

Answer rating: 100% (QA)

Second part Answer 648000 Explanation AfterTax salvage value 1 tax rate ... View the full answer