Question
Britt Real Estate is looking to establish a new office complex in downtown West Chester. The company bought land six years ago for $5.3 million.
Britt Real Estate is looking to establish a new office complex in downtown West Chester.
The company bought land six years ago for $5.3 million. The land would net $7.4 million
if it were sold today. The company now wants to build its office complex on this land.
The complex will cost $26.5 million to build and the site requires $1.32 million worth of
grading before it is suitable for construction. What type of cost is the $5.3M? The $7.4
M? What is the proper year 0 cash flow amount to use as the initial investment in fixed
assets when evaluating this project? Why?
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