Frozen, Inc. spends $750,000 on equipment for a one-year expansion project. For this project, it increases its inventory by $150,000 and accounts payable by $25,000--both are expected to reverse at project completion. The project will be housed in a building Frozen, Inc. purchased seven years ago for $1,500,000. Frozen, Inc.'s tax rate is 50% and cost of capital is 12%. What is the initial outlay (i. e., initial investment, which is a cash outflow) in year 0

$875,000

Explanation:

The investment in year 0 is the acquisition cost of the equipment plus the increase in net working capital investment which are both needed to get the project underway:

the acquisition cost of equipment=$750,000

net working capital investment=increase in inventory-increase in payable

net working capital investment=$150,000-$25,000

net working capital investment=$125,000

the initial outlay=$750,000+$125,000

the initial outlay=$875,000

The cost of acquiring the land seven years is not relevant as it is a committed/sunk cost, not a cash outflow required now

1) the stages a new product goes through from beginning to end, i.e., the stages that a product passes through from introduction through growth, maturity, and decline. 2) the time from initial research and development to the time at which sales and support of the product to customers are withdrawn. 3) the period of time during which a product can be produced and marketed profitably.

                                          hope it

answerproduct line length; product mix width;