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Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South...

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Finance

Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 11 years ago for $5 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent these facilities from a competitor instead. If the land were sold today, the company would net $10.2 million. The company wants to build its new manufacturing plant on this land; the plant will cost $14.2 million to build, and the site requires $918,000 worth of grading before it is suitable for construction.

What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project?

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