Problem:

Marshall's & Co. purchased a corner lot in Eglon City five years ago at a cost of $780,000. The lot was recently appraised at $842,000. At the time of the purchase, the company spent $58,000 to grade the lot and another $4,800 to build a small building on the lot to house a parking lot attendant who has overseen the use of the lot for daily commuter parking. The company now wants to build a new retail store on the site. The building cost is estimated at $1,270,000.

Required:

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

• $2,112,000
• $2,122,600
• $2,117,800
• $2,050,000
• $2,060,600

Note: Provide support for your rationale.