Question
Twitz Corp. is looking at setting up a new manufacturing plant in Kennesaw, GA. Twitz had bought a piece of land 5 years ago for
Twitz Corp. is looking at setting up a new manufacturing plant in Kennesaw, GA. Twitz had bought a piece of land 5 years ago for $1 million thinking to use it as for expansion of its warehouse, but Twitz decided to lease a building nearby for those purposes. Today, the value of the land net of taxes is estimated at $2.6 million. Twitz now wants to build a new manufacturing plant for a new project called AAA-T on this land; the plant will cost $8 million to build, and the site requires $1.7 million worth of improvements before it is suitable for construction. Launching the project will require an investment in working capital today in the amount of $1.9 million. In addition, new equipment in the amount of $4.0 million is needed for the project. The tax rate is 20%. What is the initial outlay (IO) for the NPV evaluation of this project?
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