The investment outlay formula they give is :

Outlay = FCInv + NWCInv Sal0 + T(Sal0 B0 )

Question 6 TA, Inc. is considering replacing a piece of old equipment with a piece of new equipment. Details for both are given below: Old Equipment Current book value Current market value Remaining life Annual sales Cash operating expenses Annual depreciation Accounting salvage value Expected salvage value after 10 years New Equipment $1,500,000 $2,500,000 10 vears $350,000 $140,000 $180,000 $0 $240,000 Acquisition cost Life Annual sales Cash operating expenses Annual depreciation Accounting salvage value Expected salvage value after 10 years $6,200,000 10 vears $850,000 $500,000 $620,000 $0 $750,000 The new equipment will require an additional investment of $250,000 in working capital,-The tax rate is 35% TA's net investment outlay to replace the old equipment is closest to A $3,950,000 B $4,300,000 C$6,450,000