Reference no: EM131492892

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 $400,000. 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?

Tiger Mfg. owns a manufacturing facility that is currently sitting idle. The facility is located on a piece of land that originally cost $159,000. The facility itself cost $1,390,000 to build. As of now, the book value of the land and the facility are $159,000 and $458,000, respectively. The firm owes no debt on either the land or the facility at the present time. The firm received a bid of $1,700,000 for the land and facility last week. The firm's management rejected this bid even though they were told that it is a reasonable offer in today's market. If the firm was to consider using this land and facility in a new project, what cost, if any, should it include in the project analysis?