Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the addition to suit in return for $225,000 upon completion and a five-year lease. The increase in rent for the addition is $10,000 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. Click the icon to view the annual sales projections. 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 S-225000. (Enter your response as an integer.) The projected annual incremental pretax cash flows attributable to this expansion in year 1 are response as an integer.) (Enter your

Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the addition to suit in return for $225,000 upon completion and a five-year lease. The increase in rent for the addition is $10,000 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. Click the icon to view the annual sales projections. 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 S-225000. (Enter your response as an integer.) The projected annual incremental pretax cash flows attributable to this expansion in year 1 are response as an integer.) (Enter your

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 5EB: A grocery store is considering the purchase of a new refrigeration unit with an Initial Investment...

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Roche Brothers is considering a capacity expansion of its supermarket. The landowner will build the addition to suit in return for $225,000 upon completion and a five-year lease. The increase in rent for the addition is $10,000 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. Click the icon to view the annual sales projections. a. If Roche expands its capacity to serve 700,000 customers per year now (end of year 0), what are the projected annuall incremental pretax cash flows attributable to this expansion? The projected annual incremental pretax cash flows attributable to this expansion in year 0 are $-225,000 (Enter your response as an integer.) The projected annual incremental pretax cash flows attributable to this expansion in year 1 are $. (Enter your response as an integer.) kamp Data Table Customers Average Sales per Customer Print 560,000 600,000…
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…
Roche Brothers is considering a capacity expansion of itssupermarket. The landowner will build the addition to suit inreturn for $200,000 upon completion and a 5-year lease. Theincrease in rent for the addition is $10,000 per month. Theannual sales projected through year 5 follow. The currenteffective capacity is equivalent to 500,000 customers per year.Assume a 2 percent pretax profit on sales.Year 1 2 3 4 5Customers 560,000 600,000 685,000 700,000 715,000Average Salesper Customer$50.00 $53.00 $56.00 $60.00 $64.00a. If Roche expands its capacity to serve 700,000 customers peryear now (end of year 0), what are the projected annual incre-mental pretax cash flows attributable to this expansion?b. If Roche expands its capacity to serve 700,000 customersper year at the end of year 2, the landowner will build thesame addition for $240,000 and a 3-year lease at $12,000 permonth. What are the projected annual incremental pretaxcash flows attributable to this expansion alternative?
A developer plans to start construction of a building in one year if at that point rent levels make construction feasible. At that time the building will cost $1,340,000 to construct. During the first year after construction would take place, there is a 60 percent chance that NOI will be $175,500 and a 40 percent chance that the NOI will be $88,600. In either case, NOI would be expected to increase at 2 percent per year after the first year. Required: How much should the developer be willing to pay for the land if he wants a 12 percent rate of return? (Round your answer to the nearest whole dollar amount.) Amount payable by developer $ 1,334,444
A developer plans to start construction of a building in one year if at that point rent levels make construction feasible. At that time the building will cost $1,000,000 to construct. During the first year after construction would take place, there is a 60 percent chance that NOI will be $150,000 and a 40 percent chance that the NOI will be $75,000. In either case, NOI would be expected to increase at 2 percent per year after the first year. Required: How much should the developer be willing to pay for the land if he wants a 12 percent rate of return?
A developer plans to start construction of a building in one year if at that point rent levels make construction feasible. At that time the building will cost $1,000,000 to construct. During the first year after construction would take place, there is a 60 percent chance that NOI will be $150,000 and a 40 percent chance that the NOI will be $75,000. In either case, NOI would be expected to increase at 2 percent per year after the first year. Required: How much should the developer be willing to pay for the land if he wants a 12 percent rate of return? could you show me on excel? thank you
A developer plans to start construction of a building in one year if at that point rent levels make construction feasible. At that time the building will cost $1,000,000 to construct. During the first year after construction would take place, there is a 60 percent chance that NOI will be $150,000 and a 40 percent chance that the NOI will be $75,000. In either case, NOI would be expected toincrease at 2 percent per year after the first year. How much should the developer be willing to pay for the land if he wants a 12 percent rate of return?
Apex Unlimited is working upon the renovation of its factory in the upcoming year and for they expect an outflow of $50,000 immediately and they expect the benefits out of the same for $25,000 for the next 3 years. The inflation rate that is currently prevailing is 5%. You are required to assess whether the decisionto renovate will be profitable by using a BCR. (Use Annual Worth method)
Monroe Corporation is considering the purchase of new equipment. The equipment will cost $35,000 today. However, due to its greater operating capacity, Monroe expects the new equipment to earn additional revenues of $5,000 by the end of each year for the next 10 years. Assuming a discount rate of 10% compounded annually, determine whether Monroe should make the purchase.
A developer plans to start construction of a building in two years if, at that point, rent levels make construction feasible. At that time, the building will cost $1,000,000 to construct. During the first year after construction (year 3), there is a 50% chance that NOI will be $150,000 and a 50% chance that the NOI will be $75,000. In either case, NOI would be expected to increase at 4% per year thereafter. What is the value of the real option on the vacant land today if the relevant discount rate is 14%? O 109,649 O 137,369 O 192,367 96,183
A Services company is projecting that demand for its services will rise considerably the next three years. They can lease additional equipment for $1,600 at the beginning of every quarter for three years. Alternatively, they can purchase the equipment for $22,995 at 8% compounded quarterly. The salvage value of the equipment after three years is expected to be $4,000. 1. What is the present value of each offer? A. Lease: B. Purchase: 2. Which option would you recommend and how much better is that option in today's dollars?
A small retail center has 1,475 square foot for rent. It has a current lease ending in two years with a contract rent of $11 per year per square foot. At the end of year 2, the investor expects to resell the property at a terminal capitalization rate of 10%. The sales cost is 5% of the resale price. The rent for year 3 is projected at the market rent level of $18 per year per square foot, and the NOI grows at a rate of 2% beyond year 3. The collection cost is .5% of the potential gross income. The capitalization rate for the net cash flow is 11%, and all cash flows happen at the end of each year. Expenses include taxes, maintenance, management, and replacement allowance. Taxes for the first year are $7,500 and increase by $700 per year. Maintenance is $2,212 for the first year and increases by $200 per year. Management is 5% of effective gross income. Replacement allowance happens at the beginning of the first year and is $112,000. Potential gross income is the revenue from rents.…