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:

Profitability

The ability of a business to generate earnings over its costs and expenses, indicating its financial health and efficiency.

Cost Effectiveness

The measure of how economically resources are converted into results, often used to assess the efficiency of different investments.

Operating Assets

Assets employed in the day-to-day operations of a business that are expected to generate income.

Generates Revenues

The process of bringing in income from business activities, such as sales of goods and services.