Your Firm Is Considering Building a New Office Complex

question 85

Multiple Choice

Your firm is considering building a new office complex.Your firm already owns land suitable for the new complex.The current book value of the land is $100,000,however a commercial real estate again has informed you that an outside buyer is interested in purchasing this land and would be willing to pay $650,000 for it.When calculating the NPV of your new office complex,ignoring taxes,the appropriate incremental cash flow for the use of this land is:

• A) $650,000
• B) $0
• C) $100,000
• D) $750,000

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Definitions:

Wagering

The act of betting or gambling money on an outcome that is largely subject to chance.

Profit

The financial gain obtained when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.

Pecuniary Interest

A financial interest, or the prospect of financial gain or loss, that may influence an individual's decisions or actions.

Insurable Interest

A financial or economic stake in the life or property insured, allowing an individual or entity to purchase insurance on the item or person.