Parker and stone, Inc is looking at setting up a new manufacturing plant in Sout
ID: 2680233 • Letter: P
Question
Parker and 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 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitro instead. If the land were sold today the company would net $5.3 million.. The company wants to build its new plant on the land, the plant will cost $11.6 million, and the site requires $425,000 worth of grading before it is suitable for construction. Whats the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? why?Explanation / Answer
relevant initial investment = current price of the land + cost to build plant + grading cost = $5.3 million + $11.6 million+$425,000 =$17.325 million