PK Properties purchased a warehouse for $1.6 million ten years ago. Four years a

Question

PK Properties purchased a warehouse for $1.6 million ten years ago. Four years ago, the company repaired the roof at a cost of $220,000. Last year, the electrical wiring and lights were upgraded at a cost of $134,000. The annual taxes on the property are $28,500 and the rental income is $170,000. The warehouse has a current book value of $800,000 and a market value of $1.95 million. The property is totally debt-free. PK is considering converting the building into a discount retailer of bulk goods. The cost of the conversion would be $95,000 and could be started next month when the existing lease on the building expires. When analyzing the bulk goods option, what value should PK assign as the initial cost of the project?

P.S. I need to show my work and this is the last problem I have. Please help.

Explanation / Answer

initial cost = 1.95 million

since the remainig repairs and developments are paid before the cosideration

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