Question

(Estimated time allowance: 5 minutes) Doce Corp. is considering launching a new product. Doce had bought a piece of land 4 years ago for $2 million thinking to use it for expansion of its warehouse, but instead Doce decided to lease a building nearby for those purposes. Today, the value of the land net of taxes is estimated at $3.4 million. Doce now wants to build a new manufacturing plant for the new project on this land. The plant will cost $9 million to build and the site requires $1.2 million worth of improvements before it is suitable for construction. Launching the project will require, today, $2.4 million investment in net operating working capital. In addition, new equipment in the amount of $3.2 million is needed for the project. The tax rate is 20%.
What is the initial investment outlay (IO) for the NPV evaluation of the project? Since the IO is a cash outlay, enter the answer using the negative sign (-) in front of the first digit of your answer.

Enter your answer in millions. For example, if you obtained -$3,450,000 then enter -3.45; for -4,000,000 then enter -4.00

Answer 1

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