nnen Industries is considering an expansion. The necessary equipment would be purchased for $17m lilon and will be fully depreclated at the time of purchase, and the expansior buld require an additional 53 million investment in net operating working capital. The tax rate is 25%. a. What is the inilial investment outiay after bonus depreciation is considered? Write out your answer completely. For example, 13 million should be entered as 13,000,000. Rpund your answer to the nearest dollar, Enter your answer as a positive value. 5 b. The compony spent and expensed $20,000 on research related to the project last year. Would this change your answer? Explain. 1. No, iast year's expenditure is considered a sunk cost and does not represent an incremental cash nlew. Hence, it should not be included in the analysis. If. Yes, the cost of research is an incremental canh fow and should be included in the analysis. III. Yes, but only the tax effect of the research expenses should be included in the analysis. IV. No, last year's expenditure should be treated as a terminal cash fow and dealk with at the end of the project's life. Hence, it should not be included in the initial investmont outbay. V. No, last year's expenditure is considered an opportunty cost and does not represent an incremental cash flow. Hence, is should not be included in the analysis. c. Suppose the compony plans to use a bulding that it owns to houpe the project. The building could be sold for 55 million after taxes and real estate commissions. How would that fact affect your answer? 1. The potential sale of the building represents an opportunity cost of conducting the project in that bulding. Therefore, the possible after-tax sale price must be cherged against the project as a cost. II. The potenelal solt of the building represents an opportunity cost of conducting the project in chat buiding. Therefore, the poss ible betore-tax sale price must be charged against the project as a cost. 13. The potencial sale of the bullding represents an extemality and therefore should not be charged against the project. tV. The potential sale of the bulding represents a real option and therelose should be charged against the project. V. The potenkiel sale of the builing reprefents a real option and therefore should not be charged against the project