Paul Bunyan is considering the purchase of a blue mechanical ox$.$ Although the ox will result in an increase in operating income of $$25,000$ per year, it has a purchase price of $$100,000,$ and it would cost an additional $$5,000$ after tax to ship and prepare the machine for use. In addition, to properly operate this machine, working capital will be increased by $$10,000.$ The mechanical ox has an expected life of $10$ years, after which it will be scrapped.

Assume simplified straight$-$line depreciation, a $40\%$ marginal tax rate, and a required rate of return of $13\%.$

What is the terminal cash flow in year $10($i$.$e$.,$ what is the annual after$-$tax cash flow in year $10,$ plus any additional cash flow associated with termination of the project$)?$

$$25,000$

$$35,500$

$$10,000$

$$25,500$

$$35,000$