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bith questions please and thank you You and two of your friends started a wholesale distribution business to distribute hardware and lawn and garden tools.
bith questions please and thank you You and two of your friends started a wholesale distribution business to distribute hardware and lawn and garden tools. Two years ago, your business paid $120,500 for 4 acres of land for a potential new distribution center to be built in Moore, OK. Today, the market value of this land is $335,000. Your company has just analyzed a proposal to develop a new distribution center, and has determined that it will not be feasible to go forward with the proposed project. Therefore, your company will sell the land for $335,000 as planned because the proposed new distribution was determined to be infeasible. When the proposed project was being analyzed, did the land represent a relevant cash flow? No, it was a sunk cost and not relevant. Yes, it was an opportunity cost, and the proposed project reflected the $335,000 current market value as an opportunity cost. Yes, it was relevant to the analysis and the historical cost of the land was a sunk cost. Yes, it was an opportunity cost, and the proposed project reflected the $214,500 net gain for the land as such. If a company has experienced an increase in its marginal statutory income tax rate, then the depreciation tax shield, all else the same, should become valuable when analyzing proposed business investment projects. at least as more less neither more nor less
bith questions please and thank you
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