Question

Franklin Corporation is considering an expansion project. The necessary equipment could be purchased for $15 million and shipping and installation costs are another $500,000. The project will also require an initial $2 million investment in net operating working capital. If the company's tax rate is 40%, what is the project's initial investment outlay (in millions)?

Answer 1

Answer:

$17.5 million.

Explanation:

to get the initial investment outlay, add up all the initial expenses. the 40% tax is not considered since only outputs or revenues are taxed.

initial investment outlay = 15 million + 0.5 million + 2 million

                                        = 17.5 million dollars