Purchase Options
Response to the following problem:
The Morgan Company was planning to expand its production facilities. Therefore it acquired one-year options to purchase two alternative sites. Each option cost $5,000 and could not be applied against the contract. One of the sites was bought for $100,000. The company was unsure whether to capitalize the land at $100,000, $105,000, or $110,000.
Required:
Write a short report that presents arguments in favor of each alternative.