The Kroger Company is evaluating an investment project that will convert a vacant lot in Virginia it owns to a warehousing and distribution center. The company acquired the property at a price of $30 million five years ago. Building the distribution center will cost the firm $100 million and has a useful life of 20 years. Once it is built, no other investment is required. The firm is currently estimating cash flows from the project. However, there is a strong demand for this vacant lot. Among others, the Disney Parks and Resorts Company is interested in leasing the land for $10 million per year for 20 years. Assume that a discount rate of 10% applies to all relevant cash flows.

Identify all incremental costs that are relevant to the firms valuation of the project and calculate the total cost (i.e., the sum of present values of the relevant costs) that should enter the analysis.