The Board of Directors of voice free chemicals is considering the acquisition of

Question

The Board of Directors of voice free chemicals is considering the acquisition of a new chemical process are the processors price at $600,000 but would require 60,000 transportation costs and 40,000 for insulation the processor will have a useful life of 10 years period The project will require waste free to increase investment in accounts receivable by $80,000 in will also requires an additional investment in inventory of $150,000 the firms marginal tax rate is 40% how much is initial cash outlay of the processor? The Board of Directors of voice free chemicals is considering the acquisition of a new chemical process are the processors price at $600,000 but would require 60,000 transportation costs and 40,000 for insulation the processor will have a useful life of 10 years period The project will require waste free to increase investment in accounts receivable by $80,000 in will also requires an additional investment in inventory of $150,000 the firms marginal tax rate is 40% how much is initial cash outlay of the processor?

Explanation / Answer

Initial Outlay is the amount require to start a business.

So, Initial Outlay = Acquisition Cost + Transportation Cost + Insulation cost + Additional Investment in inventories + Investment in Account Receivable

Initial Outlay = 600,000 + 60,000 + 40,000 + 150,000 + 80,000

Initial Outlay = $930,000

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