Question 1 (2 points) Sea Maters Inc. purchased a lot in Phenix City 6 years ago

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Question 1 (2 points) Sea Maters Inc. purchased a lot in Phenix City 6 years ago at a cost of $260,000. Today, that lot has a market value of $500,000. At the time of the purchase, the company spent $7,000 to improve the site for a future use. The company now wants to build a new facility on that site. The actual contruction cost is estimated at $1.3 million. What amount should be used as the initial cash outflow (Cfo) for this project? Put a positive dollar amount, and round it to a whole dollar, e.g, 123,456 Your Answer: Answer Save Question 2 (2 points) The Fluffy Feather sells customized handbags. Currently, it sells 21,000 handbags annually at an average price of $99 each. It is considering adding a lower-priced line of handbags that sell for $53 each. The firm estimates it can sell 21,000 of the lower-priced handbags but will sell 3,000 less of the higher-priced handbags by doing so. The amount of the sales that should be used when evaluating the addition of the lower-priced handbags is $ (Do not include the dollar sign ($). Round it to a whole dollar, e.g., $1,234,567.) Your Answer: Answer

Explanation / Answer

1) Only 1,300,000 should be considered as CF0 as other costs are sunk cost and should not be considered.

2) Additional sales = 21,000 x 53 - 3,000 x 99 = 816,000

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