What are the relevant cash flows to consider

Reference no: EM132028247

Question: Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 9 years ago for $6 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 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 $1,200,000 worth of grading before it is suitable for construction. Parker & Stone have leased the current site to a tenant, and before construction can begin the contract requires a $950,000 buyout to get the tenant out. The CFO & CEO have decided to raise the necessary cash by floating bonds, which will mean paying $50,000 to the bond underwriter and $300,000 a year in coupon payments for 8 years. What are the relevant cash flows to consider?

Reference no: EM132028247

Questions Cloud

What does it mean to be a socratic questioner : What does it mean to be a Socratic questioner? Give some examples of how using Socratic questioning might help you to think critically about an idea or an issue

What three steps are most crucial for a successful budget : What three steps are most crucial for a successful operating budget, explain why you consider them to be so important.

Interpretation hierarchy of negotiable instruments : 1. Briefly explain the reasoning or justification for the interpretation hierarchy of Negotiable Instruments?

How much equity does tiggies have on its balance sheet : If the firm's total debt at year-end was $34 million, how much equity does Tiggie's have on its balance sheet?

What are the relevant cash flows to consider : Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land 9 years ago.

Identify specific market and market structure : What is market? What is the differences between vertical and horizontal markets. Identify specific market and market structure (horizontal vs vertical).

Prepare a post-closing trial balance : Prepare a post-closing trial balance. If an amount box does not require an entry, leave it blank or enter "0". Kelly Consulting Post-Closing Trial Balance.

What will the companys value be if it sells : Three Piggies Enterprises has no debt. Its current total value is $74.4 million. Assume debt proceeds are used to repurchase equity.

Imposed on goods coming from mexico : ?If 20% tariffs are imposed on goods coming from Mexico, will this change your buying/shopping habits? (Hint: what goods that we use regularly come from Mexico?

User Account

All Pages