A skilled nursing facility chain is considering building a new facility on a piece of property that it currently owns. The property was purchased five years ago for $250,000 and could be sold now at a current market value of $100,000. When estimating the cash flows for the new facility, what amount should be included to recognize the opportunity cost of using the land for the proposed project? a. $0 (the land is a sunk cost).

b. - $150,000.

c. $250,000.

d. $100,000.

e. - $100,000.

Question

Williams

Business

27 August, 21:50

A skilled nursing facility chain is considering building a new facility on a piece of property that it currently owns. The property was purchased five years ago for $250,000 and could be sold now at a current market value of $100,000. When estimating the cash flows for the new facility, what amount should be included to recognize the opportunity cost of using the land for the proposed project? a. $0 (the land is a sunk cost).

b. - $150,000.

c. $250,000.

d. $100,000.

e. - $100,000.

+5

Answers (1)

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Van Hensley · Answer 1

e. - $100,000.

Explanation:

Data provided in the question

Purchase value of property = $250,000

The current market value of the property = $100,000

So, by considering the above information, the amount that to be considered as an opportunity cost is the salvage value i. e $100,000 but the same is not be taken for the new facility and recognized as a cash flows