Question

the project will require an initial investment of $25,000, but the project will also be using a company-owned truck that is not currently being used. this truck could be sold for $18,000, after taxes, if the project is rejected. what should yeatman do to take this information into account? the company does not need to do anything with the value of the truck because the truck is a sunk cost. increase the npv of the project by $18,000. increase the amount of the initial investment by $18,000.

Answer 1

Although the initiative will need a $25,000 initial expenditure, it will also make use of a business truck that is now unused. The initial investment is increased by $18,000.

How do you determine the upfront investment?

Initial investment is the sum needed to launch a project or a business. It is also known as initial outlay or just initial outlay. It is equivalent to capital outlays + working capital needs plus the post-tax revenues from assets sold or made available for use elsewhere.

What makes a sound first investment?

While saving for a major purchase like a car or a down payment on a house, short-term investments like money market mutual funds or high-yield savings accounts can help you increase your returns on your savings.

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