Question
Nelson Mfg. owns a factory that is currently sitting idle. The factory originally costed the firm $1,600,000 to build. As of now, the book value
Nelson Mfg. owns a factory that is currently sitting idle. The factory originally costed the firm $1,600,000 to build. As of now, the book value of the factory is $1,200,000. The firm received an offer of $1,500,000 for the factory last week. The firm's management rejected this bid even though they were told that it is a reasonable offer in today's market. The firm is evaluating a potential project that will use the factory. In addition, the project will also need the firm spend $500,000 to purchase and assemble a new production line in the factory. What is the initial cost of this project?
A. $1,600,000 B. $1,500,000 C. $1,200,000 D. $500,000 E. $2,000,000
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