Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $640,000. The lot was recently appraised at $810,000. At the time of the purchase,the company spent $50,000 to grade the lot and another $4,000 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1.2 million. What amount should be used as the initial cash flow for this building project?

Question

Quizplus · Accepted Answer

The initial cash flow should include the current appraised value of the lot ($810,000), the cost to grade the lot ($50,000), the cost of the small building ($4,000), and the building cost ($1,200,000). Total: $810,000 + $50,000 + $4,000 + $1,200,000 = $2,064,000. However, the correct choice is $2,010,000, which suggests an error in the options or calculations.