12-1 REQUIRED INVESTMENT Tannen Industries is considering an expansion. The necessary equipment would be purchased for...

Transcribed Image Text:

12-1 REQUIRED INVESTMENT Tannen Industries is considering an expansion. The necessary equipment would be purchased for $18 million, and the expansion would require an addi- tional $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? Explain. 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? 12-1 REQUIRED INVESTMENT Tannen Industries is considering an expansion. The necessary equipment would be purchased for $18 million, and the expansion would require an addi- tional $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? Explain. 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?

Answer rating: 100% (QA)

a Initial investment outlay Cost of Equipment Additional Net Operating Working Capital 18 m... View the full answer