The Jacob Chemical Company is considering building a new potassium sulfate plant.
The following cash outlays are required to complete the plant:
Year Cash Outlay
0 $4,000,000
1 2,000,000
2 500,000
Jacob's cost of capital is 12 percent, and its marginal tax rate is 40 percent.
a. Calculate the plant's net investment (NINV).
b. What is the installed cost of the plant for tax purposes?