Problem:

Dilwater Furniture purchased a corner lot in Pittsburg five years ago at a cost of $890,000. The lot was recently appraised at $1,070,000. At the time of the purchase, the company spent $80,000 to grade the lot and another $120,000 to pave the lot for commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1.8 million.

Required:

Question: What amount should be used as the initial cash flow for this building project?

• $3,070,000
• $1,070,000
• $1,800,000
• $2,870,000
• $2,890,000

Note: Show all workings.