What should you use as the cost basis for a project

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Reference no: EM131550973

If you already own the land, what should you use as the cost basis for a project? Assume you own land originally purchased for a plant for 1,000,000 but now vacant and available to build a 4,000,000 building, turnkey. The land appraises now for 100,000. Your cost of capital is 10% and your tax rate is 40%. Your revenue will increase 1,000,000 per year with this new building. Your SG&A will increase 100,000 per annum. You have no increase in working capital required. Should you do it and why or why not?

Please show all work and formulas.

Reference no: EM131550973

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