Reference no: EM133025119

Problem - Easy Inc. wants to introduce a new faster jet into the market. This project requires the following investment: Manufacturing equipment in the amount of $6.3 million and an initial $3.9 million investment in net operating working capital. Lily spent and expensed $40 million last year on research and product development. Rather than build a new manufacturing facility, Lily plans to install the equipment in a building it owns but it is not now using. The building could be sold for $34 million after taxes and commissions. The company also plans to use a vacant lot adjacent to the building for parking for the project. The site requires $1.8 million worth of improvements before it is suitable. The company had bought the piece of land 4 years ago for $11 million and has been empty ever since. Today, the value of the land net of taxes is estimated at $21.2 million. The tax rate is 20%. What is the initial investment outlay (IO) for the NPV evaluation of the project?