Parker & Stone, Incorporated, 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 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 $9.2 million. The company wants to build its new manufacturing plant on this land; the plant will cost $14.2 million to build, and the site requires $828,000 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?

Parker & Stone, Incorporated, 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 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 $9.2 million. The company wants to build its new manufacturing plant on this land; the plant will cost $14.2 million to build, and the site requires $828,000 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?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter12: Capital Budgeting: Decision Criteria

Section: Chapter Questions

Problem 20P: The Aubey Coffee Company is evaluating the within-plant distribution system for its new roasting,...

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