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solong [7]
4 years ago
11

Parker & Stone, Inc., 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 $5.3 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 $5.6 million. The company wants to build its new manufacturing plant on this land; the plant will cost $12.8 million to build, and the site requires $800,000 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?
Business
1 answer:
omeli [17]4 years ago
8 0

Answer:

$18.9 million

Explanation:

The computation of the  proper cash flow amount to use as the initial investment in fixed assets  is shown below:

= Land + building + grading

= $5.3 million + $12.8 million + $800,000

= $18.9 million

We simply added the land, building and grading cost so that the proper cash flow i.e to be used for the initial investment could come

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