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A firm purchased a piece of vacant industrial land for $1m a few years ago. Comparable lots have recently sold for $3m. The firm is
A firm purchased a piece of vacant industrial land for $1m a few years ago. Comparable lots have recently sold for $3m. The firm is considering to build a factory on that land now. Should the firm consider the cost of the land in its projected cash flows and, if so, at what cost? Select one: A. No. This is a sunk cost as the purchase lies in the past. B. Yes. The firm should use the original purchase price of $1m for cash flow calculations. C. Yes. The firm should use the market value inferred from comparable transactions for cash flow calculations. D. No. There is no opportunity cost here as the land not otherwise in use
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