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Question(s) / Instruction(s):

ACME, Inc. is completing an NPV analysis of an expansion project. The project requires machinery that costs $500,000, a $80,000 investment in working capital, and will absorb allocated overhead of $75,000 per year. A marketing study supporting the expansion cost $20,000 and has been paid for already. The expansion uses 1,400 square feet of currently unused factory floor space. The market for factory space of this type is $5 per square foot. Given the factory's configuration the space could not actually be rented.

If ACME's tax rate is 30% what is the initial investment for this project?

  1. $500,000
  2. $520,000
  3. $560,000
  4. $580,000
  5. $655,000

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