Question

High Breeze is considering expanding on some land that it currently owns. The initial cost of the land was $364,500 and it is currently valued at $357,900. The company has some unused equipment that it currently owns valued at $29,000 that could be used for this project if $8,200 is spent for equipment modifications. Other equipment costing $157,900 will also be required. What is the amount of the initial cash flow for this expansion project? Select one: a. −$553,000 b. −$158,720 c. −$530,600 d. −$559,600

Answer 1

Answer:

Option A,-$553,000

Step-by-step explanation:

The amount of initial cash flow for this project comprises of current value of the land,the current value of unused equipment,the amount expected to be spent on equipment modifications as well as the cost of other equipment.

Initial cash flows=$357,900+$29,000+$8,200+$157,900=$553,000

The equipment as well as the land are included because they can be sold at their current prices thereby realizing cash proceeds.

Also,the current values show how much would have  to pay now to acquire them should be need arises.

Answer 2

The  amount of the initial cash flow for this expansion project is Option A,-$553,000

Calculation of the initial cash flow:

= Currently value + current value of unused equipment + modification in equipment + other equipment cost

= $357,900 + $29,000 + $8,200 + $157,900

= $553,000

Therefore, The  amount of the initial cash flow for this expansion project is Option A,-$553,000

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