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DSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is

  1. DSSS Corporation is considering a new project to manufacture widgets. The cost of the manufacturing equipment is $135,000. The cost of shipping and installation is an additional $10,000. Furthermore, the building where the widgets will be manufactured was refurbished last year at a cost of $10,000. Sales are expected to be $225,000 per year. Cost of goods sold will be 60% of sales. At the beginning of the project, an increase in net working capital of $10,000 is required. At the end of three years, DSSS plans on ending the project and selling the manufacturing equipment for $20,000. The marginal tax rate is 40% and DSSS Corporations appropriate discount rate is 15%. Assume the equipment is fully depreciated at the end of the third year. What is the initial investment outlay for this project?

a.

$125,000

b.

$135,000

c.

$145,000

d.

$155,000

Please solve with the financial calculator :) Thank you!

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