The Green Shingle purchased a parcel of land 6 years ago for $299,500. At that time, the firm invested $64,000 grading the site so that it would be usable. Since the firm wasn't ready to use the site itself at that time, it decided to lease the land for $28,000 a year. The Green Shingle is now considering building a hotel on the site as the rental lease is expiring. The current value of the land is $347,500. The firm has no loans or mortgages secured by the property. What value should be included in the initial cost of the hotel project for the use of this land?

Question

Quizplus · Accepted Answer

The current value of the land, $347,500, should be included in the initial cost of the hotel project as it represents the opportunity cost of using the land for the project instead of selling it.

The Green Shingle Purchased a Parcel of Land 6 Years