Question
Investment Outlay Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $20 million, and production and sales will require an
Investment Outlay
Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $20 million, and production and sales will require an initial $4 million investment in net operating working capital. The company's tax rate is 30%.
What is the initial investment outlay? Enter your answer as a positive value. Enter your answer in dollars. For example, an answer of $1.2 million should be entered as $1,200,000. Round your answer to the nearest dollar.
$
The company spent and expensed $150,000 on research related to the new project last year. Would this change your answer?
, last year's $150,000 expenditure considered a sunk cost and
represent an incremental cash flow.
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
.
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