Jamestown Ltd.currently produces boat sails and is considering expanding its operations to include awnings for homes and travel trailers.The company owns land beside its current manufacturing
Facility that could be used for the expansion.The company bought this land ten years ago at a cost
Of €250,000.Today, the land is valued at €425,000.The grading and excavation work necessary to
Build on the land will cost €15,000.The company currently has some unused equipment which it
Currently owns valued at €60,000.This equipment could be used for producing awnings if €5,000
Is spent for equipment modiﬁcations.Other equipment costing €780,000 will also be required.
What is the amount of the initial cash ﬂow for this expansion project?

Question

Quizplus · Accepted Answer

The initial cash flow includes the opportunity cost of the land (€425,000), grading and excavation (€15,000), equipment modification (€5,000), and new equipment (€780,000). Total: €425,000 + €15,000 + €5,000 + €780,000 = €1,225,000.