Detailed Answer
Answer (C) is correct. The investment required includes increases in working capital (e.g., additional receivables and inventories resulting from the acquisition of a new manufacturing plant). The additional working capital is an initial cost of the investment, but one that will be recovered (i.e., it has a salvage value equal to its initial cost). Lawson can use current liabilities to fund assets to the extent of 10% of sales. Thus, the total initial cash outlay will be $4.6 million {$4 million + [(30% 10%) $3 million sales]}.