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Calculate the initial investment outlay

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Reference no: EM132744347

Question - A cosmetic company is considering introducing a new lotion. The manufacturing equipment will cost 560,000. The expected life of the equipment is 8 year. The company is thinking of selling the lotion in a single standard pack of 50 grams at 12 each pack. It is estimated that variable cost per pack would be 6 and annual fixed cost 450,000. Fixed cost includes depreciation of 70,000 and allocated overheads of 30,000. The company expects to sell 100,000 packs of the lotion each year. Assume that tax is 40%.

Required -

a. Calculate the initial investment outlay.

b. Compute the operating cash flow.

Reference no: EM132744347

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