Truman industries is considering an expansion. The necessary equipment would be

Question

Truman industries is considering an expansion. The necessary equipment would be purchased for $9 million, and it would also an additional $3 million investment in working capital. The tax rate is 40 percent.

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 use a building it owns but is not now using to house the project. The building could be sold for $ 1 million after taxes and real estate commissions. How could that affect your answer?

Explanation / Answer

Hope this helps :)

a. Equipment                           $ 9,000,000

NOWC Investment                    3,000,000

Initial investment outlay         $12,000,000

b. No, last year

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