Q-Corporate Finance

CFA Level I Corporate Finance
#1

A company is considering purchasing a new quipment and an analyst gathered the following information:

Cost of new equipment — $83000

Increase in net working capital required — $5500

In calculating the initial outlay for purchasing the new equipment, should we add the increased NWC on top of the cost of the equipment? Why?

#2

The new equipment will require a new structure of working capital. After the analysis made by the management, this are the results. Thus, sum both amounts, they will be invested at the same time.

#3

If you have to spend the money, you count it in your initial outlay.

Easy peasy.