Question $7$

Penn Inc. currently produces auto parts and is considering expanding its operations to

include bike parts. The company owns land beside its current manufacturing facility that

could be used for the expansion. The company bought this land ten years ago at a cost of

$$220,000.$ Today, the land is valued at $$340,000.$ The grading and excavation work

necessary to build on the land will cost $$12,000.$ The company currently owns some unused

equipment valued at $$80,000.$ This equipment could be used for producing bike parts if

$$4,000$ is spent for equipment modifications. Other equipment costing $$640,000$ will also

be required. What is the amount of the initial cash flow for this expansion project?

$$980,000$

$$1,076,000$

$$1,200,000$

$$1,262,000$

$$1,372,000$