Tannen Industries is considering an expansion. The necessary equipment would be purchased for $18 million and will be fully depreciated at the time of purchase, and the expansion would require an additional $2 million investment in net operating working capital. The tax rate is 25%. A) What is the initial investment outlay after bonus depreciation is considered? B) The company spent and expensed $20,000 on research related to the project last year. Would this change your answer? Explain. C) Suppose the company plans to use a building that it owns to house the project. The building could be sold for $1million after taxes and real estate commissions. How would that fact affect your answer?
Tannen Industries is considering an expansion. The necessary equipment would be purchased for $18 million and will be fully
A) What is the initial investment outlay after bonus depreciation is considered?
B) The company spent and expensed $20,000 on research related to the project last year. Would this change your answer? Explain.
C) Suppose the company plans to use a building that it owns to house the project. The building could be sold for $1million after taxes and real estate commissions. How would that fact affect your answer?
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