Lord Walder Frey Wedding Planner and Event Organizer, Inc., is looking at settin

Question

Lord Walder Frey Wedding Planner and Event Organizer, Inc., is looking at setting up a new mega conference facility in The Twins City. The company bought some land six years ago for $4.1 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $4.4 million. The company wants to build its new conference facility on this land; the building will cost $11.6 million to build, and the site requires $680,000 worth of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? (Enter your answer in dollars, not millions of dollars, i.e. 1,234,567.) What is the Cashflow amount?

Explanation / Answer

Calculation on Initial Investment Cost of Building (a) $11,600,000 Grading Cost (b) $680,000 Opportunity Cost of Land (c ) $4,400,000 Cash flow for evaluating project (a+b+c) $16,680,000

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