Truman Industries is considering an expansion project. The necessary equipment could be purchased for $9 million, and me project would also require an initial $3 million investment in net operating working capital. The company's tax rate is 40 percent.
a) What is the project's 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 mio after taxes and real-estate commissions. How would that affect your answer?