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 f
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 f
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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Question
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?
Transcribed Image Text:**Capital Expenditure (outfit of space)**
This refers to the funds used to outfit or equip a space for its intended purpose. This could include renovations, furnishing, or installing necessary equipment to make the space functional.
**Capital Expenditure (price of space)**
This involves the financial outlay required to acquire new space, whether purchasing or leasing. It covers the initial cost of obtaining the property or premises.
**Change in Net Working Capital**
This item pertains to the changes in a company's current assets minus its current liabilities. Tracking changes in net working capital is vital for assessing a business’s operational efficiency and short-term financial health.
**Feasibility Study Cost**
Refers to the expenses incurred during the feasibility study, which is essential in evaluating the viability, potential risks, and benefits of a proposed project before proceeding with major investments.
**Opportunity Cost**
Represents the potential benefits one misses out on when choosing one alternative over another. It is crucial for decision making as it emphasizes the potential advantages forgone when selecting a particular course of action.
![**Calculate the Initial Cash Flow:**
**Instructions:** Select values from the drop-down menus and round to the nearest dollar.
1. [Input Field] $ [Input Field]
2. [Input Field] $ [Input Field]
3. [Input Field] $ [Input Field]
4. Free Cash Flow $ [Input Field]
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This section allows you to calculate initial cash flow based on selectable values. The user is prompted to make selections from drop-down menus provided in fields 1 through 3. These selections contribute to calculating the Free Cash Flow, displayed in field 4. Ensure all figures are rounded to the nearest dollar for accuracy.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F827ba08d-994f-4772-baee-875014f5695d%2Fe5e6eaae-3493-4c54-ac65-bb4bc94c2e75%2Fu3chimm_processed.png&w=3840&q=75)
Transcribed Image Text:**Calculate the Initial Cash Flow:**
**Instructions:** Select values from the drop-down menus and round to the nearest dollar.
1. [Input Field] $ [Input Field]
2. [Input Field] $ [Input Field]
3. [Input Field] $ [Input Field]
4. Free Cash Flow $ [Input Field]
---
This section allows you to calculate initial cash flow based on selectable values. The user is prompted to make selections from drop-down menus provided in fields 1 through 3. These selections contribute to calculating the Free Cash Flow, displayed in field 4. Ensure all figures are rounded to the nearest dollar for accuracy.
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