Jefferson Industries is considereing an expansion. The necessary equipment would be purchased for $8 million and will be fully deoreciated at the time of purchase. The expansion would also require an additional $4 million investment in working capital. The tax rate is 35 percent. Last year, the company spent and expensed $400,000 on research related to the project. The company plans to house the project in an unused building it owns. If the building were sold, it would net $2 million after taxes and real estate commissions. What is the initial investment outlay for this project after bonus depreciation is considered?

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Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.