Assume the K Mart Corporation has stores that have the following facts: Annual revenues $500,000,000 Annual incomes 30,000,000 Annual gross margins 140,000,000 Annual cash flows from operations 100,000,000 All the above flows are perpetuities. The firm uses a 0.10 discount rate for this type of operation. It is agreed that all or none of the stores should be closed. Additional facts are: Book value of stores (and inventory) $1,400,000,000 Cash flow of sale or closing of stores $400,000,000. Should K Mart close the stores? Explain briefly.

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