Talbot Industries is considerinng launching a new product. The new manufaturing equipment will cost $17 millioon., and production and sales will rquire an initial $5 million investment in net operating working capital. The company's tax rate is 40%.
a) What is the initial investment outlay?
b) The company spends and expensed $150,000 on research related to the new product last year. Would this change your answer? Explain.
c) Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns butt is not in using. The building coulld be sold for $1.5 million after taxes and real estate commissions. How would this affect your answer?