What is the proper cash flow amount

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Parker & Stone, Inc., is looking at setting up a new manufacturing plant in South Park to produce garden tools. The company bought some land six 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 $5.3 million. The company wants to build its new manufacturing plant on this land; the plant will cost $12.5 million to build, and the site requires $770,000 worth of grading before it is suitable for construction.

Question 1: What is the proper cash flow amount to use as the initial investment in fixed assets when evaluating this project? Why?

Reference no: EM132448961

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