Rock Company acquired land 8 years ago for 2.2 million. Today it is valued at 5.8 million. Rock plans to build a new factory on the site which is estimated to cost 21.5 million plus addition building site preparation costs of 3.2 million. What is the appropriate initial cost for this investment?
A. 24.5 million
B. 26.5 million
C. 28.5 million
D. 30.5 million
E. 32.5 million
To determine the appropriate initial cost for this investment, we need to consider the current value of the land as well as the cost of building the new factory and the site preparation costs.
First, let's calculate the total cost for building the new factory and preparing the site:
Cost of the new factory = 21.5 million
Site preparation costs = 3.2 million
Total cost = 21.5 million + 3.2 million
Total cost = 24.7 million
Now, let's consider the value of the land when it was acquired 8 years ago and its current value:
Initial value of the land = 2.2 million
Current value of the land = 5.8 million
To determine the appropriate initial cost for this investment, we need to add the current value of the land to the total cost of building the new factory and preparing the site:
Appropriate initial cost = Total cost + Current value of the land
Appropriate initial cost = 24.7 million + 5.8 million
Appropriate initial cost = 30.5 million
Therefore, the appropriate initial cost for this investment is 30.5 million.
The answer is D. 30.5 million.