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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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