1. Kelly's Corner Bakery purchased a lot in Columbus City five years ago at a cost of $740,000. Today, that lot has a market value of $880,000. At the time of the purchase, the company spent $55,000 to level the lot and another $5,800 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1,240,000. The amount should be used as the initial cash outflow for this project is $____. Put a positive dollar amount, and round it to a whole dollar, e.g., 123456.
2. Which one of the following statements about the payback method is not true?
A. The payback method is simple and easy to understand
B. One of its strengths is that it considers entire cash flows.
C. The payback method represents the number of years it takes a project to recover its initial investment.
D. There is no economic rational that links the payback method to shareholder wealth maximization.