Parker & Stone, Incorporated, is looking at setting up a new manufacturing plant in South
Park to produce garden tools. The company bought some land 9 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 $9.6 million. The company wants to build its new
manufacturing plant on this land; the plant will cost $15.2 million to build, and the site
requires $1,440,000 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?
Multiple Choice
$24,800,000
$26,240,000
$23,360,000
$20,590,400
$27,552,000