Tannen Industries is considering an expansion. The necessary equipment would be purchased for $18 million, and the expansion would require an additional $2 million investment in net operating working capital. The tax rate is 40%
a. What is the initial investment outlay?
b. The company spent and expensed $20,000 on research related to the project last year. Would this change your answer?
c. The company plans to use a building that it owns to house the project. The building could be sold for $1 million after taxes and real estate commissions. How would that fact affect your answer?