I am moving the question to Volvo for you.
The estimate is believable for a broken timing belt. This engine
is an interference engine, meaning if the cams and crankshaft are not moving in sequence, they will collide. When this happens, if you are lucky you only bend some valves, if you are unlucky you can even damage your bottom end. I have run into a few where the impact caused the connecting rods to get slight bends in them, resulting in an uneven idle until the damaged rod was replaced.
To repair the cylinder head will need to be removed have the pistons, valves and guides checked for damage. Valves will need to be replaced as necessary (sometimes not all will get bent).
The labor for this alone is over 20 hours and equates to approximately $2000. Additional labor will apply for any valve guides that are damaged.
Valves are $70 each for exhaust, $35 each for intake.
Headgasket is $74.
Timing belt is $62.
Unfortunately, it is quite realistic for this repair to reach $3000.