31 Your firm purchased a warehouse for $335,000 six years ago. Four years ago, r

Question

31

Your firm purchased a warehouse for $335,000 six years ago. Four years ago, repairs were made to the building which cost $60,000. The annual taxes on the property are $20,000. The warehouse has a current book value of $268,000 and a market value of $295,000. The warehouse is totally paid for and solely owned by your firm. If the company decides to assign this warehouse to a new project, what value, if any, should be included in the initial cash flow of the project for this building?

Explanation / Answer

Hi,

Please find the answer as follows:

The initial cash flow would be equivalent to the market value of $295000.

Option C ($295000) is the correct answer.

Thanks.

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