The capital cost of the Rouse Hill building is expected to be $2.1 million today, including infrastructure
Question:
The capital cost of the Rouse Hill building is expected to be $2.1 million today, including infrastructure such as new power and water supply. Universal has $22.3 million cash and it plans to use $1.6 million of this amount to pay for the building which will reduce the cost to just $500,000.
Universal proposes to construct the new store on property they currently own. The property is leased to a car yard for $140,000 each year. If the new store proceeds, then Universal must terminate the lease agreement and spend $8,000 to disconnect the existing power supply as it is inadequate for the new store. The power supply equipment can be sold for $40,000 today, is being depreciated to zero at an annual depreciation expense of $15,000, and has a current carrying value of $45,000. Universal will continue to own and lease the land to the car yard if the new store is not constructed. The Australian Taxation Office (ATO) confirms that disconnection of services such as power and water are a business expense
What are the value of the cash flows at the start (year 0)?
Accounting for Governmental and Nonprofit Entities
ISBN: 978-1259917059
18th edition
Authors: Jacqueline L. Reck, James E. Rooks, Suzanne Lowensohn, Daniel Neely