this project ans Kelly's Corner Bakery purchased a lot in Oil City five yearsago at a cost of $600,000. Today, that lot has a market valueof $725,000. At the time of the purchase, the company spent$55,000 to level the lot and another $4,800 to install stormdrains. The company now wants to build a new facility onthat site. The building cost is estimated at $1,075,000. Whatamount should be used as the initial cash flow for thisproject?

The question requires the determination of the initial cash flow of investment. In finance, the…

Answered: Kelly's Corner Bakery purchased a lot…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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Kelly's Corner Bakery purchased a lot in Oil City 6 years ago at a cost of $302,000. Today, that lot has a market value of $340,000. At the time of the purchase, the company spent $15,000 to level the lot and another $20,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.51 million. What amount should be used as the initial cash flow for this project?
Kelly’s Corner Bakery purchased a lot in Oil City 6 years ago at a cost of $302,000. Today, that lot has a book value of zero and market value of $340,000. At the time of the purchase, the company spent $15,000 to level the lot and another $20,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.51 million, and will be depreciated using the straight-line method to a $400,000 book value over the 6-year life of the project. The company is evaluates this new facility will increase annual sales by $1.2 million and annual cash costs by $0.5 million. Based on past information, the company believes that it can sell the facility for $800,000 when they are done with it in 6 years. The applicable tax rate is 32 percent. What is the net present value of the project if the required rate of return is 10 percent?
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Give typing answer with explanation and conclusion
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A civil engineer who owns his own design/build/operate company purchased a small crane 3 years ago at a cost of $65,000. At that time, it was expected to be used for 10 years and then traded in for its salvage value of $10,000. Due to increased construction activities, the company would prefer to trade for a new, larger crane now, which will cost $80,000. The company estimates that the old crane can be used, if necessary, for another 3 years, at which time it would have a $17,000 estimated market value. Its current market value is estimated to be $29,000, and if it is used for another 3 years, it will have M&O costs (exclusive of operator costs) of $17,000 per year. Determine the values of P, n, S, and AOC that should be used for the existing crane in a replacement analysis. The value of P is $ . The value of n is years. The value of S is $ . The AOC value is $ per year.
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