What is proper cash flow amount to use as initial investment

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Problem 1: ABC Inc is looking to set up a new manufacturing plant to manufacture widgets. The plant will be built on a piece of vacant land the company bought for $1 million, 8 years ago. The company has not used the land in the past 8 years. Today the land is worth $3 million. The company will build its manufacturing plant on the vacant land. The plant will cost $10.5 million to build. The site, the vacant land, requires $1.5 million of grading before it is suitable for construction. What is the proper cash flow amount to use as the initial investment when evaluating this project?

A) $15.0 million
B) $10.5 million
C) $11.5 million
D) $13.0 million
E) $13.5 million

Reference no: EM132790923

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