A new investment project is to demolish an existing gas station and construct a small shopping mall.
Question:
A new investment project is to demolish an existing gas station and construct a small shopping mall. Which of the items should be treated as incremental cash flows relevant to the investment decision?
a. The current value of the land.
b. The current value of the gasoline retailing business.
c. The cost of wrecking the gas station, digging up the tanks, and cleaning the land.
d. The cost of new antipollution devices installed by order of the local government six months ago.
e. Lost earnings on other real estate projects owing to staff time that will be spent if the mall is built.
f. An allocated portion of the depreciation from the company's headquarters building.
g. The fee that has already been paid to an architect for designing the mall.
h. Future noncash expenses such as depreciation that will result if the mall is built. i. Allocation of corporate overhead to the project
Step by Step Answer:
Principles of Corporate Finance
ISBN: 978-0078034763
11th edition
Authors: Richard Brealey, Stewart Myers, Franklin Allen