In-Step Video is considering expanding its video rental library to 8,000 DVDs. The purchase price of the additional DVDs will be $80,000, and the shipping cost is another $4,000. To house the media, the owner will have to spend another $10,000 for display shelves, increase net working capital by $5,000, and interest expenses will add another $8,000 to the operating cost. What is the net investment to In-Step Video for this project?

Question

Quizplus · Accepted Answer

The net investment for In-Step Video for this project would be the sum of all the costs required to purchase and house the DVDs: 
Purchase price of DVDs: $80,000 
Shipping cost: $4,000 
Cost of display shelves: $10,000 
Increase in net working capital: $5,000 
Interest expenses: $8,000

Total net investment = $80,000 + $4,000 + $10,000 + $5,000 + $8,000 = $107,000

Therefore, the best choice is Option B.

In-Step Video Is Considering Expanding Its Video Rental Library to 8,000