Project XYZ requires an investment in equipment of $600,000 to replace existing equipment.The existing equipment will produce after-tax salvage value of $70,000.Net working capital requirements are increased by $50,000.What is the total cash outflow at time zero?

Question

Quizplus · Accepted Answer

The total cash outflow at time zero is calculated as the cost of new equipment ($600,000) minus the salvage value of the old equipment ($70,000) plus the increase in net working capital ($50,000), which equals $580,000.

Project XYZ Requires an Investment in Equipment of $600,000 to Replace