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Lion Oil Company purchased a lot in Pacific Beach 6 years ago at a cost of $600,000. Today, that lot has a market value of $800,000. At the time of the purchase, the company spent $25,000 to level the lot and another $25,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.25 million. What amount should be used as the initial cash flow for this project?

Respuesta :

Answer:

$2,050,000

Explanation:

The computation of the initial cash flow for this project is shown below:

= Market value of the lot + estimated cost of the building

= $800,000 + $1,250,000

= $2,050,000

We simply added the market value of the lot and the estimated cost of the building so that the initial cash flow for this project could come

dubeyshailja64

The initial cash flow for this project will be $2,050,000. The initial cash floe is calculated as a combination of market value of the lot and the estimated cost of building.

What is initial cash flow?

Initial cash flow refers to the amount that is available at the time when  project is in the planning stages.

The value of initial cash flow includes any loans or investments made in the project. It is represented as a negative figure.

The initial cash flow for the project will be market value of the plot and the cost of building. Therefore,

[tex]\rm Initial\:cash\:flow = \$800,000 + \$1,250,000\\\\\rm Initial\:cash\:flow = \$20,050,000[/tex]

Therefore the initial cash flows is $2,050,000.

Learn more about initial cash flows here:

brainly.com/question/2959725

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