Lillian is considering using some of the cash generated from her mail-order business to open a retail store. The fixed investment in the store is expected to be $3.5 million. This investment can be depreciated straight line over five years. Variable costs are estimated to be 35% of sales. The tax rate is 0%. Cash fixed costs total $600,000 per year.   a) What is the cash flow breakeven point (in sales $) of the venture during the first five years? What is it after the fifth year?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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: Lillian is considering using some of the cash generated from her mail-order business to open a retail store. The fixed investment in the store is expected to be $3.5 million. This investment can be depreciated straight line over five years. Variable costs are estimated to be 35% of sales. The tax rate is 0%. Cash fixed costs total $600,000 per year.

 

a) What is the cash flow breakeven point (in sales $) of the venture during the first five years? What is it after the fifth year?

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