Mason Farms purchased a building for $729,000 eight years ago. Six years ago, re
ID: 2675703 • Letter: M
Question
Mason Farms purchased a building for $729,000 eight years ago. Six years ago, repairs were made to the building which cost $136,000. The annual taxes on the property are $11,000. The building has a current market value of $825,000 and a current book value of $494,000. The building is totally paid for and solely owned by the firm. If the company decides to use this building for a new project, what value, if any, should be included in the initial cash flow of the project for this building?A. $494,000
B. $582,000
C. $825,000
D. $865,000
E. $953,000
Explanation / Answer
Mason Farms purchased a building for $729,000 eight years ago. Six years ago, repairs were made to the building which cost $136,000. The annual taxes on the property are $11,000. The building has a current market value of $825,000 and a current book value of $494,000. The building is totally paid for and solely owned by the firm. If the company decides to use this building for a new project, what value, if any, should be included in the initial cash flow of the project for this building?
A. $494,000
B. $582,000
C. $825,000
D. $865,000
E. $953,000
Opportunity cost = $825,000