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CrossTown Builders is considering remodeling an old building it currently owns. The building was purchased ten years ago for $1.2 million. Over the past ten years, the firm rented out the building and used the rent to pay off the mortgage. The building is now owned free and clear and has a current market value of $1.9 million. The company is considering remodeling the building into industrial-type apartments at an estimated cost of $1.6 million. The estimated present value of the future income from these apartments is $4.1 million. Which one of the following defines the opportunity cost of the remodeling project?

1. Cost of the remodeling

2. Current market value of the building plus the remodeling costs

3. Current market value of the building

4. Present value of the future income

5. Initial cost of the building plus the remodeling costs

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92716637

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