Ask Question, Ask an Expert


Ask Basic Finance Expert

If KF decides to build a facility, it would need a 50 acre site by 31 December 2012 (t=0). KF already owns a suitable site which cost $500,000 several years ago, and can now be sold for $2million after all expenses have been deducted. Other suitable sites can also be purchased for $2million. KF can obtain an option on a similar site in the same area for $100,000 on 31 December 2012. The option would give KF the right to purchase the site for $2.6million on 31 December 2017. It is estimated that similar sites will then have a market value of $2million. The WACC is 10%, adjusted 3% up or down for more or less risk.

In terms of the land acquistion, what cost if any should be attributed to the project and why?

find out the present value of purchasing the option now and compare it with the present value of purchasing the land outright later on. Which is the better alternative and why?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M944807

Have any Question? 

Related Questions in Basic Finance

Please write at least three well composed paragraphs that

Please write at least three well composed paragraphs that explain the cash realization cycle. What role does inventory turnover and receivable collection play in the realization of cash for a business?

What is the relationship between net exports and aggregate

What is the relationship between net exports and aggregate demand, and between net exports and capital flows? If net exports increase, ceteris paribus, what happens to real GDP? If the domestic price level increases, cet ...

Question 1 what were the responsibilities of the mortgage

Question 1: What were the responsibilities of the mortgage brokers to borrowers? To lenders? To investors? How well did they fulfill their responsibilities? Why? Question 2: Did some subprime lenders behave unethically? ...

Finanical statment analysiswrite at least 3 paragraphs

Finanical Statment Analysis Write at least 3 paragraphs answering the following: What is the SEC, and what is its role in protecting the integrity of financial statements prepared and disseminated by publically traded co ...

Us interest rates during the credit crisisduring the credit

U.S. Interest Rates during the Credit Crisis : During the credit crisis, U.S. interest rates were extremely low, which enabled businesses to borrow at a low cost. Holding other factors constant, this should result in a h ...

1 a firm has assets of 1800000 and turns over its assets 15

1. A firm has assets of $1,800,000 and turns over its assets 1.5 times per year. Return on assets is 25 percent. What is its profit margin (return on sales)? 2. A firm has a return on assets of 12 percent and a return on ...

Assignment-investmentsa general bond and investor

Assignment- INVESTMENTS A. GENERAL BOND AND INVESTOR INFORMATION 1. Briefly discuss the general characteristics of the bond touching on: a. A brief description of the company that issued the bond. b. A brief description ...

Which statement is falsea if pa 05 then the odds against

Which statement is false? A. If P(A) = .05, then the odds against event A's occurrence are 19 to 1. B. If A and B are mutually exclusive events, then P(A or B) = 0. C. The number of permutations of five things taken two ...

Pure expectations theory assume there is a sudden

Pure Expectations Theory: Assume there is a sudden expectation of lower interest rates in the future. What would be the effect on the shape of the yield curve? Explain.

Task - task covers study schedule weeks 5-shy12

Task - Task covers study schedule weeks 5-­12 inclusive. Q2-­1 Naming cells in spreadsheets Critically evaluate a YouTube video on naming cells in spreadsheets. What are the advantages of naming cells in formulas Paste a ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate