Big Joe's owns a manufacturing facility that is currently sitting idle.The facility is located on a piece of land that originally cost $129,000.The facility itself cost $750,000 to build.As of now,the book value of the land and the facility are $129,000 and $186,500,respectively.Big Joe's received an offer of $610,000 for the land and facility last week.The firm rejected this offer even though it was advised that the offer was reasonable.If Big Joe's were to consider using this land and facility in a new project,what cost,if any,should it include in the project analysis?

Question

Quizplus · Accepted Answer

The cost to include in the project analysis should be the opportunity cost, which is the amount Big Joe's could have received from selling the land and facility, i.e., $610,000.

Big Joe's Owns a Manufacturing Facility That Is Currently Sitting