Lion Oil Company purchased a lot in Pacific Beach 6 years ago at a cost of $600,000. Today, that lot has a market value of $800,000. At the time of the purchase, the company spent $25,000 to level the lot and another $25,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1.25 million. What amount should be used as the initial cash flow for this project?

$2,050,000

Explanation:

The computation of the initial cash flow for this project is shown below:

= Market value of the lot + estimated cost of the building

= $800,000 + $1,250,000

= $2,050,000

We simply added the market value of the lot and the estimated cost of the building so that the initial cash flow for this project could come

a

explanation:

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