Question

bith questions please and thank you

You and two of your friends started a wholesale distribution business to distribute hardware and lawn and garden tools. Two years ago, your business paid $120,500 for 4 acres of land for a potential new distribution center to be built in Moore, OK. Today, the market value of this land is $335,000. Your company has just analyzed a proposal to develop a new distribution center, and has determined that it will not be feasible to go forward with the proposed project. Therefore, your company will sell the land for $335,000 as planned because the proposed new distribution was determined to be infeasible. When the proposed project was being analyzed, did the land represent a relevant cash flow? No, it was a sunk cost and not relevant. Yes, it was an opportunity cost, and the proposed project reflected the $335,000 current market value as an opportunity cost. Yes, it was relevant to the analysis and the historical cost of the land was a sunk cost. Yes, it was an opportunity cost, and the proposed project reflected the $214,500 net gain for the land as such.

Answer 1

1]	Was the proposed project….......a relevant cash flow?
	*Yes, it was an opportunity cost, and the proposed
	project reflected the $335,000 current market value.
2]	If a company has experienced…..........................should
	become…....investment projects.
	*more [higher tax rate increases the benefit from
	depreciation tax shields]