Never Forget Bakery purchased a lot in Oil City six years ago at a cost of $278,000. Today, that lot has a market value of $320,000. At the time of the purchase, the company spent $6,000 to level the lot and another $8,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.03 million. What amount should be used as the initial cash flow for this project?

Question

Beckham Robinson

Business

22 July, 05:54

Never Forget Bakery purchased a lot in Oil City six years ago at a cost of $278,000. Today, that lot has a market value of $320,000. At the time of the purchase, the company spent $6,000 to level the lot and another $8,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.03 million. What amount should be used as the initial cash flow for this project?

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Answers (1)

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Alexis Esparza · Answer 1

The amount that should be used as the initial cash flow for this project is $1,350,000

Explanation:

The amount to be used as the initial cash flow for the project comprises of estimated building cost of $1.03 million and the market worth of the lot now.

The cost six years ago of $278,000, the cost of leveling as well as the cost of installing the storm drains were long ago time and are not relevant now.

In a nutshell the cost of the new project is $1,350,000 ($1,030,000+$320,0000)