Tesco Industrial Co. is considering an expansion project. The necessary equipment could be purchased for $9,000,000 and the project would also require an initial $3,000,000 investment in net operating working capital. The companys tax rate is 40%.

1. a) What is the initial investment outlay?
2. b) The company spent and expensed $50,000 on research related to the project last year. Would this

change your answer? Explain.

c) The company plans to house the project in a building it owns but is not now using. The building

could be sold for $1,000,000 after taxes and real estate commissions. How would this affect your answer?