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REQUIRED INVESTMENT Truman Industries is considering an expansion. The necessary equipment would be purchased for $9 million, and the expansion would require an additional $3 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 $50,000 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 building could be sold for $1 million after taxes and real estate commissions. How would that fact affect your answer?

BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977
BuyFind

Fundamentals of Financial Manageme...

14th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781285867977

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Chapter
Section
Chapter 12, Problem 1P
Textbook Problem

REQUIRED INVESTMENT Truman Industries is considering an expansion. The necessary equipment would be purchased for $9 million, and the expansion would require an additional $3 million investment in net operating working capital. The tax rate is 40%.

  1. a. What is the initial investment outlay?
  2. b. The company spent and expensed $50,000 on research related to the project last year. Would this change your answer? Explain.
  3. c. The company plans to use a building that it owns to house the project. The building could be sold for $1 million after taxes and real estate commissions. How would that fact affect your answer?

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