Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. T

Question

Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $8.7 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $11.5 million if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $22.7 million to build, and the site requires $1,020,000 worth of grading before it is suitable for construction. Required: What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

Explanation / Answer

Cash flow =11 500 000 + 22 700 000+ 1,020,000

=35,220,000 answer

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