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What is the​ project's outflow at​ t=0?  Answer to the nearest whole dollar value.

What is the​ project's outflow at​ t=0?  Answer to the nearest whole dollar value.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter8: Cost Analysis
Section: Chapter Questions
Problem 1E
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Aero Motorcycles is considering opening a new manufacturing facility in Fort Worth to meet demand for a new line of solar charged motorcycles​ (who wants to ride on a cloudy day​ anyway?) The proposed project has the following​ features;
​• The firm just spent​ $300,000 for marketing study to determine consumer demand​ (@ t=0).
​• Aero Motorcycles purchased the land the factory will be built on 5 years ago for​ $2,000,000 and owns it outright​ (that is, it does not have a​ mortgage). The land has a current market value of​ $2,600,000.
​• The project has an initial cost of​ $20,902,178 (excluding​ land, hint: land is not subject to​ depreciation).
​​• If the project is​ undertaken, the company will realize an additional​ $8,000,000 in sales over each of the next ten years.​ (i.e. sales in each year are​ $8,000,000)
​• The company’s operating cost​ (not including​ depreciation) will equal​ 50% of sales.
​• The company’s tax rate is 35 percent.
​• Use a​ 10-year straight-line depreciation schedule.
​• At t​ = 10, the project is expected to cease being economically viable and the factory​ (including land) will be sold for                                            ​$4,500,000 (assume land has a book value equal to the original purchase​ price).
​• The project’s WACC​ = 10 percent
​• Assume the firm is profitable and able to use any tax credits​ (i.e. negative​ taxes) .0
What is the​ project's outflow at​ t=0?  Answer to the nearest whole dollar value.
 
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