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?