Should land price be included in Capital Budgeting?

CFA Level II
#1

Guys,

Should we include land or building price in initial outlay considering the company owned the land/building previously? Similarly, should we include in terminal value if the land/building is sold after the project?

Thanks.

#2

I vaguely remember land is considered a sunk cost, therefore not included.

#3

Depends on whether the company was doing something/planning on doing something with the land/building. If so, the opportunity cost should be included.

#4

That’s true. For eg if the land is not generating any revenues (such as rent) then do not include. But if eg you can rent or lease the land then it’s your opportunity cost and should be included in calculations.