You are the owner of a building materials outlet, and you are considering adding a garden supplies section to your store. The cost of the expansion will be $1.5 million, to be depreciated over its 4-year life, using straight line depreciation to an expected salvage value of $500,000 at the end of the 4th year. The garden supplies are expected to generate revenues of $600,000 in the 1st year, $ 650,000 in the 2nd year, $700,000 in the 3rd and 4th years. The expenses of operating the garden supplies section are expected to be 40% of revenues each year and the tax rate is 35%. Working capital requirements are expected to be 10% of revenues (made at the beginning of each period). a) Estimate the total initial investment for this project. b) Estimate the operating free cash flows to the firm (FCFF) on the project for the next 4 years.
You are the owner of a building materials outlet, and you are considering adding a garden supplies section to your store. The cost of the expansion will be $1.5 million, to be
a) Estimate the total initial investment for this project.
b) Estimate the operating
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Abdulrahim Taysir
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