Question
Your company purchased a vacant lot 3 years ago for $1.2 million and at that time spent $100,000 to convert it into a parking lot,
Your company purchased a vacant lot 3 years ago for $1.2 million and at that time spent $100,000 to convert it into a parking lot, which now generates $120,000/year in revenue. You are considering building a distribution center on the lot with a construction cost of $5 million and an annual OCF of $750,000. Which of these cash flows should be included in a capital budgeting analysis for the distribution center? I. The $1.2 Million purchase price for the lot II. The $100,000 conversion cost III. The $120,000/ year parking revenue IV. The $5 million construction cost for the distribution center V. The $750,000/year OCF from the distribution center
I and II only | ||
I, III, IV only | ||
IV, and V only | ||
III, IV, and V only | ||
ALL of them |
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