Alexa bought a store two years ago for $250,000. She leased it out at $4,000 a month. Now she is considering the option to cancel the lease and use the location a a salon. About two months ago, Alexa changed the flooring of the store at a cost of $20,000. She estimates that the machinery for the salon will cost $150,000. Alexa expects the net operating cash flows to be $35,000 annually for 5 years, after which she plans to scrap the remaining inventory and retire. If she opens up this new salo the sales from her other salon would drop by 10%. Alexa wants a return of 9% on hi investment or else she would not go ahead with his plans. The $4000 leasing revenue would be included in the calculation of operating cash flows as it the opportunity cost. True
Alexa bought a store two years ago for $250,000. She leased it out at $4,000 a month. Now she is considering the option to cancel the lease and use the location a a salon. About two months ago, Alexa changed the flooring of the store at a cost of $20,000. She estimates that the machinery for the salon will cost $150,000. Alexa expects the net operating cash flows to be $35,000 annually for 5 years, after which she plans to scrap the remaining inventory and retire. If she opens up this new salo the sales from her other salon would drop by 10%. Alexa wants a return of 9% on hi investment or else she would not go ahead with his plans. The $4000 leasing revenue would be included in the calculation of operating cash flows as it the opportunity cost. True
Chapter11: Long-term Assets
Section: Chapter Questions
Problem 7EB: Kenzie purchased a new 3-D printer for $450,000. Although this printer is expected to last for ten...
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Question
![Alexa bought a store two years ago for $250,000. She leased it out at $4,000 a
month. Now she is considering the option to cancel the lease and use the location as
a salon. About two months ago, Alexa changed the flooring of the store at a cost of
$20,000. She estimates that the machinery for the salon will cost $150,000. Alexa
expects the net operating cash flows to be $35,000 annually for 5 years, after which
she plans to scrap the remaining inventory and retire. If she opens up this new salon,
the sales from her other salon would drop by 10%. Alexa wants a return of 9% on his
investment or else she would not go ahead with his plans.
The $4000 leasing revenue would be included in the calculation of operating cash
flows as it the opportunity cost.
True
False](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F96ebf87d-fa28-47c7-a40b-dc7357eedff0%2Fda85ac5e-95c9-4bfd-8bc0-55aba0bf6de2%2Fgtgpfg_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Alexa bought a store two years ago for $250,000. She leased it out at $4,000 a
month. Now she is considering the option to cancel the lease and use the location as
a salon. About two months ago, Alexa changed the flooring of the store at a cost of
$20,000. She estimates that the machinery for the salon will cost $150,000. Alexa
expects the net operating cash flows to be $35,000 annually for 5 years, after which
she plans to scrap the remaining inventory and retire. If she opens up this new salon,
the sales from her other salon would drop by 10%. Alexa wants a return of 9% on his
investment or else she would not go ahead with his plans.
The $4000 leasing revenue would be included in the calculation of operating cash
flows as it the opportunity cost.
True
False
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