13-1: Identifying Relevant Cash Flows

Problem 13-1 Investment Outlay

Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $14 million, and production and sales will require an initial $4 million investment in net operating working capital. The company's tax rate is 40%.

What is the initial investment outlay? Write out your answer completely. For example, 2 million should be entered as 2,000,000. $

The company spent and expensed $150,000 on research related to the new product last year. Would this change your answer? -Select-YesNoItem 2

Rather than build a new manufacturing facility, the company plans to install the equipment in a building 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? The project's cost will -Select-increasedecreasenot changeItem 3 .