Project A:
This project requires an initial investment of $20,000,000 in equipment which will cost
an additional $3,000,000 to install. The firm will use the attached MACRS depreciation
schedule to expense this equipment. Once the equipment is installed, the company will
need to increase raw goods inventory by $5,000,000, but it will also see an increase in
accounts payable of $1,500,000. With this investment, the project will last 6 years at
which time the market value for the equipment will be $1,000,000.