14. Drake Builders, Inc. purchased a lot in Arizona 10 years ago at a cost of $3

Question

14. Drake Builders, Inc. purchased a lot in Arizona 10 years ago at a cost of $380K. At the time of the purchase, the company spent $15K to level the lot and another $20K to install storm drains. Today, that lot has a market value of $650K. The company now wants to build a new facility on that site. The building cost is estimated at $1.9M. Which of the following is the correct initial cash flow in a capital-budgeting analysis of this proposed facility? (a) $2.55M, (a) $415K, (c) $2.965M, (d) $1.9M, or (e) $650K

Explanation / Answer

b) -$ 415K is the correct initial cash flow

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