Question
You are a project manager. You are estimating cash flows of a potential project that requires investment of $250,000 in a machine, including installation cost,
You are a project manager. You are estimating cash flows of a potential project that requires investment of $250,000 in a machine, including installation cost, and $40,000 in working capital which will be fully captures at the end of the project. The marchine has the estimated life of 5 years and will be depreciated vie simplified straight-line method. The project is expected to raise the firm's revenues by $330,000 and costs by $125,000 annually. Since the trend of the product moves rapidly, you expect to terminate this project in 3 years. In 3 years, the machine you purchase for the project can be sold for $50,000. The firm has the marginal tax rate of 34%. What is the terminal value of the project?
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