Use as the initial investment in fixed assets

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Kenny, Inc., is looking at setting up a new manufacturing plant in South Park. The company bought some land six years ago for $7.6 million in anticipation of using it as a warehouse and distribution site, but the company has since decided to rent facilities elsewhere. The land would net $10.4 million if it were sold today. The company now wants to build its new manufacturing plant on this land; the plant will cost $21.6 million to build, and the site requires $910,000 worth of grading before it is suitable for construction.

Required:

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

Reference no: EM13880961

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