Calculate the initial investment outlay (IO) for the following project. The project consists in manufacturing new high-end vaccum cleaners. The project requires an investment of $4.0 million for new equipment and and $15 million to build a manufacturing plant. The company had bought a piece of land 5 years ago for $2 million thinking to use it for expansion of its warehouse, but instead it decided to lease a building nearby for those purposes. The company now wants to build the new manufacturing plant for the new project on this land. Today, the value of the land net of taxes is estimated at $3.9 million and the site requires $1.4 million worth of improvements before it is suitable for construction. Launching the project will require, today, $3.4 million investment in net operating working capital. The tax rate is 30%. Since the IO is a cash outlay, enter the answer using the negative sign.

Answer rating: 100% (QA)

To calculate the initial investment outlay IO for the project we need to consider all the rele... View the full answer