Your firm purchased a warehouse for $335,000 six years ago. Four years ago, repairs were made to the building which cost $60,000. The annual taxes on the property are $20,000. The warehouse has a current book value of $268,000 and a market value of $295,000. The warehouse is totally paid for and solely owned by your firm. If the company decides to assign this warehouse to a new project, what value, if any, should be included in the initial cash flow of the project for this building?

Question

Ariel Oneal

Business

26 December, 05:34

Your firm purchased a warehouse for $335,000 six years ago. Four years ago, repairs were made to the building which cost $60,000. The annual taxes on the property are $20,000. The warehouse has a current book value of $268,000 and a market value of $295,000. The warehouse is totally paid for and solely owned by your firm. If the company decides to assign this warehouse to a new project, what value, if any, should be included in the initial cash flow of the project for this building?

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Answers (1)

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Zachary Rangel · Answer 1

Answer:$295,000

Explanation:

6 years ago, the purchase price of the warehouse was $335,000 and the current warehouse market worth is $295,000 and the book value is $268,000. If the company decides to assign this warehouse to a new project, it should include its current market worth as the initial cash flow for the building because if the company does not use the warehouse for project purposes, the company receives a cash flow of $295,000, market worth as cash flow.

The firm must place a market worth of $295,000 as the initial cash flow for the project.