Consider this example:

ACE Playing Card Company. is looking at setting up a new printing plant outside of Las Vega. The company bought a plot of vacant land three years ago planning to possibly testing facility, but the company has since decided to lease facilities elsewhere.

The company now wants to build its new printing plant on this land;

• The land cost them $2.5 million when they bought it.
• The land was appraised last week for $5.2 million.
• The plant will cost $12 million to build, and
• The site requires $1 million worth of draining used oil before it is suitable for construction.

What is the proper cash flow amount that they should use as the initial investment in fixed assets when evaluating this project?

A. $0, the cost of the land is a sunk cost.

B. $5.2 million, the appraised value of the land.

C. $2.5 million, the original cost of the land.

D. $17.2 million, the appraised value of the land plus construction costs.

E. $18.2 million, the appraised value of the land plus improvements and draining.

F. $20 million, the original cost of the land, plus improvements, plus the draining cost.