please help with this whole problem. The first drop down gives the options $720,

Question

please help with this whole problem. The first drop down gives the options $720,000, $3,780,000, $4,212,000. The 2nd gives the options for assets salvage value, projects additional accounts recievable investments, or assest's installation, shipping, and delivery costs. The 3rd drop down gives the options for $3,780,000, 3,924,000, or 4,212,000.

2. Incremental costs Initial and terminal cash flow Aa Aa Marston Manufacturing Company is considering a project that requires an investment in new equipment of $3,600,000, with an additional $180,000 in shipping and installation costs. Marston estimates that its accounts receivable and inventories need to increase by $720,000 to support the new project, some of which is financed by a $288,000 increase in spontaneous liabilities (accounts payable and accruals). and consists of the price of the new equipment plus The total cost of Marston's new equipment is the In contrast, Marston's initial investment outlay is Suppose Marston's new equipment is expected to sell for $600,000 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 $360,000 O $600,000 O $792,000 O $672,000

Explanation / Answer

Cost o new equipment total = Cost o new equipment+installation, shipping, and delivery costs

=3600000+180000 = 3780000

installation, shipping, and delivery costs.

Initial investment outlay = Cost o new equipment total+(accounts receivables and inventories-spontaneous liabilities)

=3780000+(720000-288000)

=

4,212,000

terminal cash flow = selling price*(1-tax rate)+(accounts receivables and inventories-spontaneous liabilities)

=600000*(1-0.4)+(720000-288000) =

792000

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