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Tanya [424]
3 years ago
13

Scottech is examining an investment opportunity that will involve buying $100,000 worth of equipment. They will need $10,000 in

net working capital up front. Shipping will cost $5,000 and installation will cost $8,000. The firm paid a management consultant $4,000 to analyze this project, which is supposed to increase sales by $20,000 per year. If the firm accepts the project, they will have to spend $3,500 to train the employees to use the new equipment. The corporate tax rate is 21%. What is the initial outlay for the project?
a) $126,500

b) $130,500

c) $123,000

d) $150,500

e) $142,300
Business
1 answer:
aleksandrvk [35]3 years ago
7 0

Answer:

113,000.

Explanation:

Let go through all the items to see whether we need to include them in the initial outlay or not.

(1) $100,000 worth of equipment => Yes

(2) Shipping will cost $5,000 and installation will cost $8,000 => Yes (Add to purchase price of equipment)

(3) Paid a management consultant $4,000 to analyze this project => No =>This is sunk cost (already incurred regardless of accept or reject the prject)

(4) Increase sales by $20,000 per year => No => under operating cashflow.

(5) $3,500 to train the employees to use the new equipment => No => under operating cashflow.

So, total initial outlay = 100,000 + 5,000 + 8,000 = 113,000.

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3 0
1 year ago
Letitia borrowed $6,000 from her bank two years ago. The loan term is four years. Each year, she must repay the bank $1,500 in p
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Answer:

amortised loan

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5 0
2 years ago
Assume that one year ago, you bought 130 shares of a mutual fund for $27 per share, you received an income distribution of $0.12
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Answer:

Solution:

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First, we calculate the capital gain distributions

Income and capital gains distribution = ($0.12 + $0.22) x 130 shares

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