Question

High Breeze currently produces boat sails and is considering expanding into awnings for homes and travel trailers. The company owns land that could be used for the expansion. This land was purchased five at a cost of $319,000 and is valued today at $395,000. The company has some unused equipment that it currently owns valued at $38,000. This equipment could be used for producing awnings if $12,000 is spent for equipment modifications. Other equipment costing $138,000 will also be required. What is the amount of the initial cash flow for this expansion project

Answer 1

- $583,000

Step-by-step explanation:

The computation of the initial investment is shown below:

= - (Today value price of land + current value of unused equipment + producing awnings cost + cost of other equipment)

= - ($395,000 + $38,000 + $12,000 + $138,000)

= - $583,000

The initial investment should always be displayed in a negative sign.

All other information which is given is not relevant. Hence, ignored it