Basin Manufacturing (40% marginal tax rate)is considering a plant expansion project. The equipment will cost $100,000 and will require an additional $10,000 for delivery and installation. The expansion also will require Basin to increase immediately its net working capital by $25,000. The expansion is expected to generate revenues of $150,000 per year. Calculate the project's net investment.

Question

Quizplus · Accepted Answer

The net investment for the project includes the cost of equipment, delivery and installation costs, and the increase in net working capital. Therefore, the total net investment is $100,000 (equipment) + $10,000 (delivery and installation) + $25,000 (net working capital) = $135,000. None of the provided options match this calculation.

Basin Manufacturing (40% Marginal Tax Rate)is Considering a Plant Expansion