Terragon plastics inc is considering an expansion at its, Ask an Expert

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Terragon Plastics Inc. is considering an expansion at its manufacturing facility. The equipment would be purchased for $8.5 million. An initial net operating working capital investment equal to 10% of the estimated sales of $15 million in the first year would be required. The firm’s tax rate is 40%.

a. What is the initial investment outlay (year 0)?

b. Assume you learn that Terragon Plastics also spent $60,000 for a consultant to the project last year. Would this change your answer in part a?

c. Now assume that Terragon plans to use an existing building that it owns to house the project. The building was constructed ten years ago at a cost of $700,000, but could be sold for $1.2 million after taxes. Would this affect your answer to part a?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92082137

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