Problem:
Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $780,000. The lot was recently appraised at $842,000. At the time of the purchase, the company spent $58,000 to grade the lot and another $4,800 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 $1,270,000.
Required:
Question: What amount should be used as the initial cash flow for this building project?
- $2,112,000
- $2,122,600
- $2,117,800
- $2,050,000
- $2,060,600
Note: Provide support for your rationale.