Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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Investment Outlay
Talbot Industries is considering
launching a new product. The new
manufacturing equipment will cost $9
million, and production and sales will
require an initial $1 million investment in
net operating working capital. The
company's tax rate is 25%. Enter your
answers as a positive values. Enter your
answers in millions. For example, an
answer of $10,550,000 should be
entered as 10.55. Round your answers
to two decimal places.
a. What is the initial investment outlay?
$
b. The company spent and expensed
$150,000 on research related to the
new project last year. What is the
initial investment outlay?
$
million
$
million
c. Rather than build a new
manufacturing facility, the company
plans to install the equipment in a
building it owns but is not now using.
The building could be sold for $1.3
million after taxes and real estate
commissions. What is the initial
investment outlay?
million
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Transcribed Image Text:Investment Outlay Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $9 million, and production and sales will require an initial $1 million investment in net operating working capital. The company's tax rate is 25%. Enter your answers as a positive values. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55. Round your answers to two decimal places. a. What is the initial investment outlay? $ b. The company spent and expensed $150,000 on research related to the new project last year. What is the initial investment outlay? $ million $ million c. Rather than build a new manufacturing facility, the company plans to install the equipment in a building it owns but is not now using. The building could be sold for $1.3 million after taxes and real estate commissions. What is the initial investment outlay? million
Expert Solution
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Step 1

Initial Investment

The investment made at the start of a new project is known as an initial investment. When the initial amount is recovered, the project is successful. The initial investment helps the project get a loan during the start-up phase. 

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