Q-Corporate Finance

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?

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.

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

Easy peasy.