Answer:
1.Initial investment outlay= $19 million
2. N0
3.Initial investment outlay= $ 20.5 million
The project's cost will INCREASE
Explanation:
1. Calculation for the initial investment outlay
Using this is formula
Initial investment outlay = New equipment cost + Working capital
Let plug in the formula
Initial investment outlay= $16 million + $3 million
Initial investment outlay= $19 million
Therefore the Initial investment outlay will be $19 million
2. If the company spent and as well expensed the amount of $150,000 on research related to the new product last year, this means that the amount of $150,000 which is a research cost will be a sunk cost because it occured last year which simply means that the initial investment outlay will still remains the amount of $ 19 million.
Therefore there would NOT be any change in the initial investment outlay because it will still remains at the amount of $ 19 million.
3. If the building could be sold for the amount of $1.5 million after taxes and real estate commissions and the company wishes NOT to sell the building this will lead to a loss for the company which is why the company will have to add the amount of $1.5 million into the already initial investment outlay of $19 million while evaluating their project.
Hence,
Initial investment outlay = $19 million +$ 1.5 million
Initial investment outlay= $ 20.5 million
Therefore The project's cost will INCREASE by the market value of the building
