Problem:
Bargin Pharmaceuticals,owns a manufacturing facility that is currently sitting idle. The facility is located on a piece of land that originally cost $267,000. The facility itself cost $1,460,000 to build. As of now, the book value of the land and the facility are $267,000 and $617,000, respectively. The firm owes no debt on either the land or the facility at the present time. The firm received a bid of $1,619,000 for the land and facility last week. The firm's management rejected this bid even though they were told that it is a reasonable offer in today's market.
Required:
Question: If the firm was to consider using this land and facility in a new project, what cost, if any, should it include in the project analysis?
- $0
- $617,000
- $887,000
- $1,619,000
Note: Please provide full description.