Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the addition to suit in return for $175,000 upon completion and a five-year lease. The increase in rent for the addition is $8,000 per month. The annual sales projected through year 5 follow. The current effective capacity is equivalent to 500,000 customers per year. Assume a 2 percent pretax profit on sales. Data Table LOADING... Year 1 2 3 4 5 Customers 560,000 600,000 675,000 700,000 725,000 Average Sales per Customer $51.00 $54.00 $58.00 $60.00 $64.00 a. If Roche expands its capacity to serve 700,000 customers per year now (end of year 0), what are the projected annual incremental pretax cash flows attributable to this expansion? The projected annual incremental pretax cash flows attributable to this expansion in year 0 are $-------. (Enter your response as an integer.)
Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the addition to suit in return for $175,000 upon completion and a five-year lease. The increase in rent for the addition is $8,000 per month. The annual sales projected through year 5 follow. The current effective capacity is equivalent to 500,000 customers per year. Assume a 2 percent pretax profit on sales. Data Table LOADING... Year 1 2 3 4 5 Customers 560,000 600,000 675,000 700,000 725,000 Average Sales per Customer $51.00 $54.00 $58.00 $60.00 $64.00 a. If Roche expands its capacity to serve 700,000 customers per year now (end of year 0), what are the projected annual incremental pretax cash flows attributable to this expansion? The projected annual incremental pretax cash flows attributable to this expansion in year 0 are $-------. (Enter your response as an integer.)
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
Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the addition to suit in return for
$175,000
upon completion and a five-year lease. The increase in rent for the addition is
$8,000
per month. The annual sales projected through year 5 follow. The current effective capacity is equivalent to 500,000 customers per year. Assume a
2
percent pretax profit on sales.Data Table
LOADING...
|
Year
|
1
|
2
|
3
|
4
|
5
|
|
|
Customers
|
560,000
|
600,000
|
675,000
|
700,000
|
725,000
|
|
|
Average Sales per Customer
|
$51.00
|
$54.00
|
$58.00
|
$60.00
|
$64.00
|
a. If Roche expands its capacity to serve 700,000 customers per year now (end of year 0), what are the projected annual incremental pretax cash flows attributable to this expansion?
The projected annual incremental pretax cash flows attributable to this expansion in year 0 are
$-------.
(Enter
your response as an
integer.)
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