You have just completed a $21,000 feasibility study for a new coffee shop in some retail space you own. You bought th space two years ago for $103,000, and if you sold it today, you would net $113,000 after taxes. Outfitting the space for coffee shop would require a capital expenditure of $27,000 plus an initial investment of $5,300 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity? Identify the relevant incremental cash flows below: (Select all the choices that apply.) A. Amount you would net after taxes should you sell the space today. B. Feasibility study for the new coffee shop. C. Initial investment in inventory. D. Price you paid for the space two years ago. E. Capital expenditure to outfit the space.

You have just completed a $21,000 feasibility study for a new coffee shop in some retail space you own. You bought th space two years ago for $103,000, and if you sold it today, you would net $113,000 after taxes. Outfitting the space for coffee shop would require a capital expenditure of $27,000 plus an initial investment of $5,300 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity? Identify the relevant incremental cash flows below: (Select all the choices that apply.) A. Amount you would net after taxes should you sell the space today. B. Feasibility study for the new coffee shop. C. Initial investment in inventory. D. Price you paid for the space two years ago. E. Capital expenditure to outfit the space.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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How do I solve this accounting question?
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Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: You can rent a location for your business at a cost of $36, 000 per year. The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of S 25,000. Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. Other operating costs would include $56, 000 per year in salaries, S4, 000 per year for insurance, $25, 000 per year for utilities, and a 3% sales commission. The payback period for this investment opportunity is closest to: Multiple Choice 4.08 years, 2.20 years. 3.80 years. 3.08 years.
Assume that you are thinking about starting your own small business. You have made the following estimates regarding this opportunity: • You can rent a location for your business at a cost of $36,000 per year. The equipment costs incurred to start the business would total $250,000. The equipment would have a 5-year useful life and a salvage value of $25,000 Your company's estimated sales per year would equal $350,000 and its variable cost of goods sold would be 30% of sales. • Other operating costs would include $58,000 per year in salaries, $4,000 per year for insurance, $25,000 per year for utilities, and a 3% sales commission The simple rate of return for this investment opportunity is closest to: Multiple Choice 22.0% 19.0% 26.6% 15.7%
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You have just completed a $15,000 feasibility study for a new coffee shop in some retail space you own. You bought the space two years ago for $96,000, and if you sold it today, you would net $114,000 after taxes. Outfitting the space for a coffee shop would require a capital expenditure of $35,000 plus an initial investment of $5,500 in inventory. What is the correct initial cash flow for your analysis of the coffee shop opportunity?
XYZ, which currently sells art products, is considering project Q, which would involve teaching art lessons For most of its existence, XYZ sold art products, taught art lessons, and painted murals Project Q Would require an initial investment of $87,300 today and is expected to produce annual cash flows of $10,200 each year forever with the first annual cash flow expected in 1 year What is the NPV of project Q. based on the information in this paragraph and the following table and applying the pure play approach to detemining a project's cost of capital? Firm XYZ Frisco Frescos NorCal Art Art Factory Line of business Sells art products Paints murals at residential and commercial sights Teaches art lessons Sells art products, teaches art lessons, & paints murals WACC 144 percent 82 percent 95 percent 77 percent O a. $20,068 (plus or minus $10) Ob. $144,518 (plus or minus $10) OC. $37,090 (plus or minus $10) O d. $45,168 (plus or minus $10) O e. None of the above is within $10 of the…
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A firm that purchases electricity from the local utility for $300,000 per year is considering installing a steam generator at a cost of $340,000. The cost of operating this generator would be $160,000 per year, and the generator will last for five years. If the firm buys the generator, it does not need to purchase any electricity from the local utility. The cost of capital is 11%. For the local utility option, consider five years of electricity purchases. For the generator option, assume immediate installation, with purchase and operating costs in the current year and operating costs continuing for the next four years. Assume payments under both options at the start of each year (i.e., immediate, one year from now,..., four years from now). What is the net present value of the more attractive choice?

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