The Corner Market has decided to expand its retail store by building on a vacant

Question

The Corner Market has decided to expand its retail store by building on a vacant lot it currently owns. This lot was purchased four years ago at a cost of $299,000, which the firm paid in cash. To date, the firm has spent another $38,000 on land improvements, all of which was also paid in cash. Today, the lot has a market value of $329,000. What value should be included in the analysis of the expansion project for the cost of the land?

A. Zero because the land and the improvements were purchased with cash.

B. The current market value of the land.

C. The original purchase price only.

Explanation / Answer

current market value of the land should be included in the analysis of the expansion project for the cost of the land as it is an opportunity cost.If you use this land for any project , you have to forgone the market value of land.

Cost of land and cost of improvements are suck cost so , should not be considered in project analysis

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