Do fast answer of this accounting questions 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?

Initial Cash Flow Calculation :1. Market value of the lot: Since the lot has a market value of…

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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Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 6 years ago for $5,397,921 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 $3,370,355. An engineer was hired to study the land at a cost of $559,424, and her conclusion was that the land can support the new manufacturing facility. The company wants to build its new manufacturing plant on this land; the plant will cost $4,394,972 million to build, and the site requires $1,358,566 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?
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Give typing answer with explanation and conclusion
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