Financial Management

This topic has 1 reply, 2 voices, and was last updated 13 years ago by John Moffat.

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December 2, 2012 at 7:57 pm #56075
romilly
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A company is considering establishing a plant. Land was purchased two years ago on which it intends to build its new plant. Should the cost of land be included as a relevant cost. In my answer I excluded it because I thought it was a sunk cost. However the answer included it as a relevant cost. Why ?
December 3, 2012 at 2:55 pm #109484
John Moffat
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Is the question asking you to appraise using DCF?
What will they do with the land if they do not build the new plant?

Without seeing the full question, I cannot say why they have not treated it as a sunk cost.
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