11.1). Investment Outlay

Talbot Industries is considering launching a new product. The new manufacturing equipment will cost 417 million, and production and sales will require an initial 45 million investment in net operating working capital. the company's tax rate is 40%.

a. What is he initial investment outlay?

b. The company spent and expensed 4150,000 on research related to the new product last year. would this change your answer? Explain.

c. Rather than build a new manufacturing facility, the company plans to install the equipment in a buiilding it owns but is not now using. The building could be sold for $1.5 million after taxes and real estate commissions. How would this affect your answer?

11.2). Operating Cash Flow

The financial staff of Carin Communications has identified the followng infromation for the first year of the roll-out of its new proposed service:

Projected sales $18 million

Oprating costs (not including depreciation) $ 9 million

Depreciation $ 4 million

Interest expense $ 3 million

The company faces a 40% tax rate. Wht is the project's operating cash flow fr the first year (t=1)?

11.3). Net Salvage Value

Allen Air Lines must liquidate some equipment that is being replaced. The equipment originally cst $12 million, f which 75% has been depreciated. The used equipment can be sold today for $4 million, and its tax rate is 40%. What is the equipment;s after-tax net salvage value?