1. Kelly's Corner Bakery purchased a lot in Oil City five years ago at a cost of $600,000. Today, that lot has a market value of $840,000. At the time of the purchase, the company spent $49,000 to level the lot and another $3,000 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1,070,000. What amount should be used as the initial cash flow for this project?
$-1,070,000
$-1,959,000
$-1,670,000
$-1,910,000
$-1,719,000
2. Miller Mfg. is analyzing a proposed project. The company expects to sell 13,000 units, plus or minus 4 percent. The expected variable cost per unit is $7.00 and the expected fixed cost is $36,000. The fixed and variable cost estimates are considered accurate within a plus or minus 6 percent range. The depreciation expense is $31,000. The tax rate is 34 percent. The sale price is estimated at $16.00 a unit, give or take 5 percent. What is the net income under the worst case scenario?
$39,678.02
$18,436.70
$27,934.40
$37,432.10
$38,929.38