Question

Fifteen years ago, Wilburn Corporation paid $48,000 for ten acres of land with a view to one day building a warehouse on it. Now Wilburn is investigating the investment in a warehouse and has several locations it could use. That land was recently appraised at $120,000. The question you must address is this: How should Wilburn use this information in the analysis of the prospective warehouse investment?

Group of answer choices

Wilburn should regard both the historical cost and the current value of the land as sunk costs and ignore them in calculating the initial outlay.

Wilburn should regard the historical cost as an opportunity cost and ignore it in calculating the initial outlay; it should regard the current market value as a sunk cost and include it in the initial outlay.

Wilburn should regard both the historical cost and the current value of the land as opportunity costs and include them in calculating the initial outlay.

Wilburn should regard the historical cost as a sunk cost and ignore it in calculating the initial outlay; it should regard the current market value as an opportunity cost and include it in the initial outlay.

Answer 1