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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
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%.
- a) What is the initial investment outlay?
- 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?
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