Tannen Industries is considering an expansion. The necessaryequipment would be purchased for $18 million, and the expansion would require an additional$2 million investment in net operating working capital. The tax rate is 40%.a. What is the initial investment outlay?b. The company spent and expensed $20,000 on research related to the project last year.Would this change your answer? Explain.c. The company plans to use a building that it owns to house the project. The buildingcould be sold for $1 million after taxes and real estate commissions. How would thatfact affect your answer?

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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.