It refers to the amount that a company requires for making a new investment. This new investment can be for any purpose, such as adding a new product line, taking up a new project, establishing more outlets, etc. The initial outlay calculator will help you calculate the amount of such investments.
The following is the formula to calculate the initial outlay:
Initial Outlay = Total Capital Expenditures + Change in Working Capital – Sales of Old Asset (if any) + Tax on Profit from Sale of Old Asset (if any)
Initial Outlay Calculator
How to Calculate using Calculator?
Enter the following figures into the initial outlay calculator to simply arrive at the amount of initial investment.
Capital Expenditures or Fixed Capital Investment – This includes investment in the new equipment or other fixed assets, such as land. Moreover, it also includes installation and shipping costs related to purchasing the equipment.
Changes in Working Capital – A new project results in a change in working capital, such as raw materials, inventory, and more. Usually, the working capital requirement increases with a new project. However, it may drop if a company is updating to new efficient machinery.
Proceed from the Sale of Old Assets – It refers to the amount one gets after selling the old equipment or assets. Such proceeds are also called salvage value and are close to the current market value of the asset sold. Ideally, such an item should be considered if the company updates the current facility. For instance, upgrading the production facility might involve selling old machines or equipment. However, in the case, of developing a completely new facility, a business may not have any old assets to dispose of.
Tax on Profit or Loss from the Sale of Assets – If a company sells an old asset for more than its book value (value in the company’s record), then there will be a capital gain. On this profit, the company will have to pay the applicable tax. On the other hand, if a company incurs a loss on the sale of an old asset, it would prove a tax benefit.
