1.

The new factory will be placed on industrial land with a market value of $2 million. If not used for the project, the land would likely be sold to another manufacturer. This alternative use for the land would be called a(an) ________.

Select one:

a. externality

b. opportunity cost

c. sunk cost

d. relevant cost or revenue

e. terminal cost

2.

A business plans to construct a new factory on land originally purchased at the cost of $950,000. After buying the property, an old building was demolished at the cost of $95,000 and $35,000 was spent on landscaping. The current market value of the land is $1,150,000. The business expects to spend $1,660,000 to construct the factory and to purchase manufacturing equipment. What amount would you record as the initial investment (e.g. step #1) for the purposes of calculating the project's NPV?

Select one:

a. $2,610,000

b. $2,940,000

c. $2,740,000

d. $2,790,000

e. $2,810,000

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