What is the initial investment outlay

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Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $17 million, and production and sales will require an initial $5 million investment in net operating working capital. The company’s tax rate is 40%. a. What is the initial investment outlay? b. The company spent and expensed $150,000 on research related to the new product last year. Would this change your answer? Explain. 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 $1.5 million after taxes and real estate commissions. How would this affect your answer? (11-2) The financial staff of Cairn Communications has identified the following information for the first year of the roll-out of its new proposed service: Projected Sales $18 Million Operating Costs (not including depreciation) $9 Million Depreciation $4 Million Interest Expense $3 Million The company faces a 40% tax rate. What is the project’s operating cash flow for the first year (t = 1)?

Reference no: EM13868348

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