Problem:
Dilwater Furniture purchased a corner lot in Pittsburg five years ago at a cost of $890,000. The lot was recently appraised at $1,070,000. At the time of the purchase, the company spent $80,000 to grade the lot and another $120,000 to pave the lot for commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1.8 million.
Required:
Question: What amount should be used as the initial cash flow for this building project?
- $3,070,000
- $1,070,000
- $1,800,000
- $2,870,000
- $2,890,000
Note: Show all workings.