1) Holt Bolts, Inc. is considering building a new factory. The company bought vacant land in the city 25 years ago for $550,000 on which the new factory could be built. However, a residential property developer has made the company an offer to buy the land for $3,000,000 if it decides not to build a factory on the site. It would cost $3,000,000 to build the factory. What would the Initial Investment (cash flow in Year 0) be for purposes of calculating whether or not to build the factory?

	$6,550,000
	$3,000,000
	$3,550,000
	$5,450,000
	$6,000,000

2) Hawkeye Innovations is considering developing a new type of mouse trap. They have made the following estimates regarding the development of the new product:

• The life of the project is 7 years
• The project will require additional equipment that will cost $21,000. None of the equipment will have any salvage value.
• Sales are expected to be 10,000 units per year at $4.50 per unit
• Variable costs are expected to be $2.60 per unit
• Fixed costs are expected to be $12,000 per year
• The annual Depreciation expense would be $3,000
• Additional Net Working Capital will be needed in Year 0 in the amount of $8,000. 60% of this will be recovered in Year 7
• The companys tax rate is 34%
• The Required Rate of Return on the project is 10%

What is the Initial Cost of the project (Year 0 Total Cash Flow)?

	$21,000
	$33,000
	$29,000
	$36,000