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Mary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment                                                 $ 175,000 Working capital needed                                        $ 185,000 Annual cash inflow from sales                             $ 190,000 Annual cash outflow for operating costs              $ 145,000 Salvage value of equipment                                 $   20,000

Mary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are: Cost of equipment                                                 $ 175,000 Working capital needed                                        $ 185,000 Annual cash inflow from sales                             $ 190,000 Annual cash outflow for operating costs              $ 145,000 Salvage value of equipment                                 $   20,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Mary is considering opening a hobby and craft store. Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. Ignore income taxes in this problem.) The data pertaining to her investment opportunity are:

Cost of equipment                                                 $ 175,000

Working capital needed                                        $ 185,000

Annual cash inflow from sales                             $ 190,000

Annual cash outflow for operating costs              $ 145,000

Salvage value of equipment                                 $   20,000

 Mary plans to operate the business for six years. Mary requires a minimum 6% return on this investment. What is the TOTAL cash inflow that comes JUST in year 6? Do NOT include the annual cash flows from the earlier problem.

Expert Solution
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Net present value is the value of investment of the company in the present market. Whereas, cash flow represents the cash inflow and outflow of the company due to operating, financing, and investing activities.

 

 

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