Question
Winnebagel, Inc., is looking at setting up a new plant in South Part to produce bagels and bread. The company bought some land ten years
Winnebagel, Inc., is looking at setting up a new plant in South Part to produce bagels and bread. The company bought some land ten years ago for $5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $5.2 million. The company wants to build its new plant on this land; the plant will cost $10.2 million to build, and the site requires $750,000 worth of grading before it is suitable for construction. The project also requires the investment in the net working capital of $500,000 at the beginning of the project. What is the proper cash flow amount to use for the initial investment when we evaluate this project?
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