Your firm is considering building a new office complex. Your firm already owns land suitable for the new complex. The current book value of the land is $130,000; however,
a commercial real estate agent has informed you that an outside buyer is interested in purchasing this land would be willing to pay $700,000 for it. When calculating the net present value (NPV) of your new office complex, ignoring taxes, the appropriate incremental cash flow for the use of this land is ________.
A) $700,000
B) $0
C) $130,000
D) $830,000
Answer: A
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a. true b. false
Jaycee Auto Repair has the following budgeted costs for the next year:
Time Charges Material Charges Shop employees' wages and benefits $120,000 $- Parts manager's salary and benefits - 45,000 Office employee's salary and benefits 30,000 15,000 Other overhead 15,000 40,000 Invoice cost of parts and materials - 400,000 Total budgeted costs $165,000 $500,000 Jaycee Auto Repair budgets 7,500 hours of repair time and it desires a profit margin of $25 per hour of labor. A markup on material cost is assumed to be 40%. Jaycee estimates that the repairs to a Cadillac Escalade damaged in an accident will take 45 hours of labor and $3,500 in parts and materials. The total cost of the repairs is a) $7,015. b) $5,890. c) $5,775. d) $7,890.