Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six years ago for $7.5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. If the land were sold today, the company would net $10.3 million. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.5 million to build, and the site requires $900,000 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 six years ago for $7.5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. If the land were sold today, the company would net $10.3 million. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.5 million to build, and the site requires $900,000 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?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South Park to produce garden tools. The
company bought some land six years ago for $7.5 million in anticipation of using it as a warehouse and distribution site, but
the company has since decided to rent facilities elsewhere. If the land were sold today, the company would net $10.3
million. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.5 million to build,
and the site requires $900,000 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?
Note: Do not round intermediate calculations and enter your answer in dollars, not millions, rounded to the nearest
whole number, e.g., 1,234,567.
Answer is complete but not entirely correct.
Cash flow
$
25,200,000 x
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