how to calculate immediate cash outflow required for a project

Question

The Finney Company is reviewing the possibility of remodeling one of its showrooms and buying some new equipment to improve sales operations. The remodeling would cost $280,000 now and the useful life of the project is 10 years. Additional working capital needed immediately for this project would be $50,000; the working capital would be released for use elsewhere at the end of the 10-year period. The equipment and other materials used in the project would have a salvage value of $30,000 in 10 years. Finney's discount rate is 16%. (Ignore income taxes.)

The immediate cash outflow required for this project would be:

 

a. $(280,000)

b. $(230,000)

c. $(310,000)

d. $(330,000)

 

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Comments

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