A Corporate Manager Decides to Build a New Store on a Lot

question 61

Multiple Choice

A corporate manager decides to build a new store on a lot owned by the corporation that could be sold to a local developer for $250,000.The lot was purchased for $50,000 twenty years ago.When determining the value of the new store project,

• A) the cost of the lot is zero since the corporation already owns it.
• B) the opportunity cost of the lot is $250,000 and should be included in calculating the value of the project.
• C) the cost of the lot for valuation purposes is $50,000 because land does not depreciate.
• D) the incremental cash flow should be the $50,000 original cost less accumulated amortization.

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Definitions:

Inner Processes

Internal cognitive or psychological activities that influence thoughts, feelings, and behaviors.

Cognitive Map

A mental representation of one's physical environment, allowing for navigation, understanding spatial relationships, and planning routes.

Gestalt

An approach emphasizing that the whole of something is greater than its parts, used particularly in psychology to describe patterns and perceptions.

Insight

The ability to comprehend someone or something thoroughly and precisely.