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Talbot Industries is considering launching a new product. The new manufacturing equipment will cost $15 million, and production and sales will require an initial $4 million investment in net operating working capital. The company's tax rate is 35%

What is the initial investment outlay? Write out your answer completely. For example, 2 million should be entered as 2,000,000.
$ __________________

The company spent and expensed $150,000 on research related to the project last year. Would this change your answer?
Yes or No

Respuesta :

Answer:

a. 19 million

b. No

Explanation:

The computation is shown below:

a. The initial investment outlay is

= New manufacturing equipment cost + net operating working capital

= $15 million + $4 million

= $19 million

2. In this the company spent and expensed $150,000 last year which reflects the sunk cost and we already know that the sunk cost is the cost which is not relevant while taking the decision and we also called as a past cost

So, the answer should not be changed i.e $19 million