1. Truman Industries is considering an expansion. The necessary equipment would be purchased for $12. The expansion would require an additional $2 investment in net operating working capital. The company spent and expensed $3 on research related to the project last year. The company plans to use a building that it owns to house the project. The building could be sold for $6 after taxes and real estate commissions. What is the initial investment outlay?

2. KTS is trying to estimate the first-year operating cash flow. The financial staff has given you the following information:

Incremental revenue = $8

Depreciation = $2

Interest Expense = $1

Marginal tax rate = 50%

What is the operating cash flow in year 1?

a. 3

b. 2.5

c. 5