BreesCo Investment Analysis: Determining Appropriate Cash Flow
How do we calculate the appropriate cash flow at time 0 for BreesCo's investment?
What are the key factors involved in determining the cash flow for BreesCo's land investment?
What is the formula to calculate the cash flow at time 0 for this particular investment?
Calculation of Appropriate Cash Flow for BreesCo's Investment
The appropriate cash flow at time 0 for this investment is $347,524. Cash flow = Current value of the land - Initial cost of the land - Cost of improvements - Cost of traffic study = Cash flow at time 0.
To calculate the appropriate cash flow at time 0 for this investment, we need to consider the initial cost of the land, the value of the land today, the cost of improvements, and the cost of the traffic study.
The initial cost of the land was $3,351,520. This means that BreesCo paid this amount when they purchased the land nine years ago.
The current value of the land is $4,939,137. This represents the current worth of the land.
The improvements required for the land amount to $135,266. This represents the cost of making the land suitable for the intended purpose.
Additionally, BreesCo paid $104,827 for a traffic study. This expense is incurred to determine the potential sales generated by a store in this location.
To calculate the appropriate cash flow at time 0, we need to subtract the initial cost of the land, the cost of improvements, and the cost of the traffic study from the current value of the land:
Current value of the land - Initial cost of the land - Cost of improvements - Cost of traffic study = Cash flow at time 0
Substituting the given values:
$4,939,137 - $3,351,520 - $135,266 - $104,827 = Cash flow at time 0
Calculating this expression:
$4,939,137 - $3,351,520 - $135,266 - $104,827 = $347,524